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+
+ - BANKS, MERGERS, AND THE AFFECTED COMMUNITIES
+
+[House Hearing, 108 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+
+
+ BANKS, MERGERS, AND THE AFFECTED COMMUNITIES
+
+=======================================================================
+
+ FIELD HEARING
+
+ BEFORE THE
+
+ COMMITTEE ON FINANCIAL SERVICES
+
+ U.S. HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED EIGHTH CONGRESS
+
+ SECOND SESSION
+
+ __________
+
+ DECEMBER 14, 2004
+
+ __________
+
+ Printed for the use of the Committee on Financial Services
+
+ Serial No. 108-117
+
+
+
+ U.S. GOVERNMENT PRINTING OFFICE
+20-952 WASHINGTON : 2005
+_____________________________________________________________________________
+For Sale by the Superintendent of Documents, U.S. Government Printing Office
+Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
+Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001
+
+ HOUSE COMMITTEE ON FINANCIAL SERVICES
+
+ MICHAEL G. OXLEY, Ohio, Chairman
+
+JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
+RICHARD H. BAKER, Louisiana PAUL E. KANJORSKI, Pennsylvania
+SPENCER BACHUS, Alabama MAXINE WATERS, California
+MICHAEL N. CASTLE, Delaware CAROLYN B. MALONEY, New York
+PETER T. KING, New York LUIS V. GUTIERREZ, Illinois
+EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
+FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina
+ROBERT W. NEY, Ohio GARY L. ACKERMAN, New York
+SUE W. KELLY, New York, Vice Chair DARLENE HOOLEY, Oregon
+RON PAUL, Texas JULIA CARSON, Indiana
+PAUL E. GILLMOR, Ohio BRAD SHERMAN, California
+JIM RYUN, Kansas GREGORY W. MEEKS, New York
+STEVEN C. LaTOURETTE, Ohio BARBARA LEE, California
+DONALD A. MANZULLO, Illinois JAY INSLEE, Washington
+WALTER B. JONES, Jr., North DENNIS MOORE, Kansas
+ Carolina MICHAEL E. CAPUANO, Massachusetts
+DOUG OSE, California HAROLD E. FORD, Jr., Tennessee
+JUDY BIGGERT, Illinois RUBEN HINOJOSA, Texas
+MARK GREEN, Wisconsin KEN LUCAS, Kentucky
+PATRICK J. TOOMEY, Pennsylvania JOSEPH CROWLEY, New York
+CHRISTOPHER SHAYS, Connecticut WM. LACY CLAY, Missouri
+JOHN B. SHADEGG, Arizona STEVE ISRAEL, New York
+VITO FOSSELLA, New York MIKE ROSS, Arkansas
+GARY G. MILLER, California CAROLYN McCARTHY, New York
+MELISSA A. HART, Pennsylvania JOE BACA, California
+SHELLEY MOORE CAPITO, West Virginia JIM MATHESON, Utah
+PATRICK J. TIBERI, Ohio STEPHEN F. LYNCH, Massachusetts
+MARK R. KENNEDY, Minnesota BRAD MILLER, North Carolina
+TOM FEENEY, Florida RAHM EMANUEL, Illinois
+JEB HENSARLING, Texas DAVID SCOTT, Georgia
+SCOTT GARRETT, New Jersey ARTUR DAVIS, Alabama
+TIM MURPHY, Pennsylvania CHRIS BELL, Texas
+GINNY BROWN-WAITE, Florida
+J. GRESHAM BARRETT, South Carolina BERNARD SANDERS, Vermont
+KATHERINE HARRIS, Florida
+RICK RENZI, Arizona
+JIM GERLACH, Pennsylvania
+
+ Robert U. Foster, III, Staff Director
+
+
+ C O N T E N T S
+
+ ----------
+ Page
+Hearing held on:
+ December 14, 2004............................................ 1
+Appendix:
+ December 14, 2004............................................ 75
+
+ WITNESSES
+ Tuesday, December 14, 2004
+
+Antonakes, Hon. Steven L., Commissioner of Banks, Commonwealth of
+ Massachusetts.................................................. 62
+Baldwin, Irene, Executive Director, Association for Neighborhood
+ and Housing Development........................................ 11
+Campanelli, Joseph P., President and Chief Operating Officer,
+ Sovereign Bank New England Division and Vice Chairman of
+ Sovereign Bankcorp, Inc........................................ 37
+Cofield, Juan, President, New England Area Conference of NAACP... 8
+Finucane, Anne, President, Northeast Bank of America Corporation. 34
+Flynn, Maureen, Deputy Director, Massachusetts Association of
+ Community Development Corporations, Inc........................ 4
+Hagins, Florence, Assistant Director, Massachusetts Affordable
+ Housing Alliance............................................... 6
+Nuciforo, Hon. Andrea F. Jr., Senator, Massachusetts State House. 60
+Quinn, Hon. John F., Representative, Massachusetts State House... 57
+Thall, Mathew, Senior Program Director, Local Initiatives Support
+ Corporation.................................................... 13
+
+ APPENDIX
+
+Prepared statements:
+ Bachus, Hon. Spencer......................................... 76
+ Lynch, Hon. Stephen F........................................ 79
+ Murphy, Hon. Tim............................................. 81
+ Antonakes, Hon. Steven L..................................... 82
+ Baldwin, Irene............................................... 91
+ Campanelli, Joseph P......................................... 110
+ Cofield, Juan................................................ 270
+ Finucane, Anne............................................... 277
+ Flynn, Maureen............................................... 288
+ Hagins, Florence............................................. 307
+ Nuciforo, Hon. Andrea F. Jr.................................. 311
+ Quinn, Hon. John F........................................... 321
+ Thall, Mathew................................................ 328
+
+ Additional Material Submitted for the Record
+
+Frank, Hon. Barney:
+ Written questions submitted for December 14, 2004 Boston
+ Field Hearing.............................................. 333
+ Responses to questions from Hon. Barney Frank................ 335
+Watt, Hon. Melvin L.:
+ ``Lending wisdom,'' The Boston Globe, January 20, 2004....... 339
+ ``Bank of America to add 300 jobs,'' The Boston Globe,
+ December 11, 2004.......................................... 340
+ ``Bill Tightens Bank Merger Rules in State,'' The Boston
+ Globe, December 4, 2004.................................... 342
+ ``Mergers Pinching Smaller Nonprofits,'' The Boston Globe,
+ November 21, 2004.......................................... 344
+ ``Bank of America to Cut More Jobs; Firm: Most Trims Will
+ Come From Outside The State,'' The Boston Globe, October 8,
+ 2004....................................................... 347
+ ``Hold Bank Accountable,'' The Boston Globe, September 1,
+ 2004....................................................... 349
+ ``Bye-Bye Big Bank, A Look At San Francisco Without Bank of
+ America's Headquarters Suggest Boston's Future Without
+ Fleetboston Isn't Easy to Predict,'' The Boston Globe,
+ February 1, 2004........................................... 351
+Nuciforo, Hon. Andrea F. Jr.:
+ Southcoast Workforce Development Update, prepared statement.. 354
+Inner City Press/Community on the Move & Fair Finance Watch,
+ prepared statement............................................. 371
+
+
+ BANKS, MERGERS, AND THE AFFECTED COMMUNITIES
+
+ ----------
+
+
+ Tuesday, December 14, 2004
+
+ U.S. House of Representatives,
+ Committee on Financial Services
+ Washington, D.C.
+ The committee met, pursuant to call, at 10:12 a.m., at the
+Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston,
+Massachusetts, Hon. Spencer Bachus [presiding.]
+ Present: Representatives Bachus, Murphy, Frank, Watt,
+Meeks, Lee, Capuano, Lynch. Also present was Representative
+Tierney.
+ Chairman Bachus. Good morning. The Committee on Financial
+Services will come to order.
+ Today is a full Committee hearing requested by Mr. Barney
+Frank, Senior Ranking Member of the Committee, to examine the
+economic impact of large bank mergers, with particular focus on
+the two mergers we've had here in the Northeast. Gramm-Leach-
+Bliley have other factors contributed to me a large number of
+bank mergers we have seen recently.
+ Since the mid-'40s, there's been a decline of about 40
+percent in the number of banking organizations; and the ten
+largest U.S. banking organizations, they've increased their
+deposit share or bank asset share from 20 percent to 46 percent
+by the end of last year. So there has been a tremendous
+consolidation in the industry.
+ In fact, three of our banks, Bank of America, who will have
+a witness testify today, along with JPMorgan Chase and
+Citibank, are actually bumping up against the 10 percent
+deposit limit of Riegle-Neal.
+ We're going to shorten our time for opening statements
+because we have three panels. Our first panel will be consumer
+advocates and public-interest advocates; our second panel will
+be representatives of the banks involved. We will have
+representatives from Bank of America and also from Sovereign
+Bank; and our third panel will have a state senator, state
+representative and a banking commissioner from the State of
+Massachusetts.
+ Because we do want to get right to our witnesses, we're
+going to constrict our opening statements. I'll submit my
+entire opening statement for the record.
+ I would note that Bank of America and Fleet Boston did
+announce that they were stepping up their CRA commitments over
+a ten-year period as a result of the merger, and I'm sure there
+will be testimony on that and how that's going.
+ [The following information can be found on page 333 in the
+appendix.]
+ Chairman Bachus. With that, Mr. Frank?
+ Mr. Frank. Thank you, Mr. Chairman. I want to express my
+very deep personal appreciation. We often say that, but on
+occasion we really mean it; and this is one of them.
+ To the chairman of the full Committee, Mike Oxley, and to
+my colleague, Spencer Bachus, it is a refutation of the notion
+that partisanship has totally seized control of Congress that
+the Republicans, who are in the majority, agreed to this
+important hearing.
+ I am deeply appreciative to Chairman Oxley and his staff
+for this, to my two colleagues, Spencer Bachus and Tim Murphy,
+who at some inconvenience to themselves, at a time when frankly
+our workload is not supposed to be the highest, agreed to come
+here.
+ I want to express my appreciation also to other of my
+colleagues who joined us from elsewhere: Congressman Watt from
+North Carolina, Congresswoman Lee from California, Congressman
+Meeks from New York, as well as my Massachusetts colleagues who
+have joined us.
+ This is a very important issue, both specifically and
+generally. Obviously the impact of the Bank of America purchase
+of Fleet is of great significance to Massachusetts, and indeed
+to the rest of New England; but this is also symptomatic of a
+national set of issues. And this is not a hearing only about
+Bank of America; we will be hearing from one witness who has
+had dealings with JPMorgan Chase, which was mentioned by the
+chairman. These are not personal issues; there are very
+significant public policy issues here.
+ I just want to add one thing. One of the concerns that I'm
+sometimes asked to address is, well, what business is it of you
+and other elected officials to dictate or put pressure on a
+private institution? How do you come to feel that you can tell
+a bank, well, you've hired too few people or you haven't done
+enough in this lending area.
+ The answer is, in part, that banks are a very important
+part of our free market system, and they perform an essential
+role. I think virtually every one of us on this panel has
+cooperated with the banks in things like allowing them to
+truncate checks, and we've tried to reform deposit insurance.
+ We are very much interested in a better functioning of the
+banking system in the interest of the economy as a whole, but
+let's also be clear: Banks have deposit insurance guaranteed by
+the federal government. They have access to the discount window
+in the Federal Reserve system. Banks are protected against
+competition by the restrictions on entry. In other words, banks
+are a very important part of our system, and they receive a
+great deal of protection and assistance from the government.
+ In return, Congress passed and the President signed the
+Community Reinvestment Act which imposes certain reciprocal
+restrictions; so when we discuss these things, it's in that
+context. It does not mean that we don't recognize that banks
+are essential to the functioning of our free market economy. It
+is that we recognize also that, given the advantages that we
+give banks so that they can perform that function, it is
+important that there be something in return.
+ I appreciate that, Mr. Chairman, and I thank you for
+holding this important hearing.
+ Chairman Bachus. Thank you, Mr. Frank.
+ Chairman Bachus. Mr. Watt?
+ Mr. Watt. Thank you, Mr. Chairman.
+ We actually agreed not to make opening statements in the
+interest of time to get some witnesses who have some time
+problems to not just sit here and listen to all of us, but I
+asked them to give me one minute to make two disclosures, just
+in the interest of full disclosure.
+ First of all, one of the institutions that's represented
+here is based in my Congressional district, and that's Bank of
+America. So I wanted to welcome them, although I don't have the
+right to be welcoming anybody to Boston; but at least so that
+everybody would know that the home base of Bank of America is
+actually physically located in my Congressional district.
+ The second disclosure is that Juan Cofield, one of the
+witnesses on the first panel, who's over the NAACP branches
+here in this area, and I were classmates at the University of
+North Carolina. We in fact, between me, Juan, and James, his
+brother, represented one-fourth of the African-Americans in a
+class of over two thousand students when we started
+undergraduate school; and when we finished, we probably
+represented about one-half of the people in that class, because
+through attrition, some of them had gone and done other things.
+ So we go back a long way, and I want to welcome him and
+thank him for being here personally. Thank you very much.
+ Chairman Bachus. Thank you, Mr. Watt.
+ Chairman Bachus. I'd also note for the record that
+Charlotte also is about the second largest bank in my home
+town.
+ Mr. Frank. Mr. Chairman, one last thing while we're
+acknowledging home towns. I think we should note that we are in
+the district of my colleague, Mr. Lynch; so our home
+Congressman is also here.
+ Chairman Bachus. You might want to introduce the other
+Members of the Massachusetts delegation.
+ Mr. Frank. Yes. We're joined by our Congressman John
+Tierney, from north of here, who is not a Member of the
+Committee, and we particularly appreciate his taking the time
+to be here; Congressman Lynch, who is a Member of the
+Committee; and Congressman Capuano, whose district is about a
+block away.
+ Mr. Capuano. Across the street.
+ Mr. Frank. Across the street. I'm delighted to have my
+colleagues here.
+ We have Congressman Meeks from New York; Congresswoman Lee
+from California, who also has a claim of former host, because
+the Bank of America name came from the Bank of America which
+was originally in the Bay Area. So Congresswoman Lee from
+Oakland has a piece of that claim.
+ Chairman Bachus. We also have Mr. Murphy, who's from
+Pennsylvania; and Sovereign Bank is in your district.
+ Mr. Murphy. Mellon.
+ Chairman Bachus. Now that we've had those exciting opening
+statements, we'll turn to our first panelist, Ms. Maureen
+Flynn, deputy director of the Massachusetts Association of
+Community Development Corporations; Ms. Florence Hagins,
+director of Massachusetts Affordable Housing Alliance; Mr.
+Cofield, who has already been introduced. Juan Cofield?
+ Mr. Cofield. Right.
+ Chairman Bachus. New England Area Conference of NAACP; Ms.
+Irene Baldwin, executive director of the Association for
+Neighborhood and Housing Development; and Mr. Mathew Thall,
+senior program director of Local Initiative Support
+Corporation.
+ So we welcome you all, and at this time we will start with
+Ms. Flynn and hear your opening statement. Then we will go to
+Ms. Hagins and down the line.
+
+ STATEMENT OF MAUREEN FLYNN, DEPUTY DIRECTOR, MASSACHUSETTS
+ ASSOCIATION OF COMMUNITY DEVELOPMENT CORPORATIONS, INC.
+
+ Ms. Flynn. Thank you, Chairman Bachus, Congressman Frank
+and Members of the Committee, especially the Massachusetts
+delegation, for being here today. We appreciate your holding a
+field hearing in Massachusetts on the recent mergers.
+ Before I start, I wanted to make clear that my testimony
+today includes the comments and the input of two other members
+of our statewide coalition on CRA issues, which is the Fair
+Housing Center of Greater Boston and the Lawyers' Committee for
+Civil Rights. They cannot testify today, but my comments
+include their comments.
+ I will address my comments in the order of the questions
+that were asked to us as a panel, and I have submitted written
+testimony; so this is a summary of what I've said in my written
+testimony.
+ First, regarding job loss: As a group that represents low-
+and moderate-income communities across Massachusetts, we are
+most disturbed by the job losses sustained by southeastern
+Massachusetts because of the most recent Sovereign acquisition
+of Seacoast Bank. The merger resulted in the elimination of 350
+jobs in southeastern Massachusetts.
+ The recent Bank of America acquisition of Fleet Bank
+resulted in the loss of key bank positions and employees who
+were able to make a positive connection between Fleet Bank and
+the communities that they serve. In addition, Bank of America
+has effectively reduced its CRA staff, so that there is just
+one CRA officer now for two states, Massachusetts and Rhode
+Island.
+ Secondly, regarding the extent to which acquiring banks
+have entered into commitments during the merger process: On
+December 1, 2004, Sovereign Bank signed a new five-year
+community investment agreement. The details of that agreement
+are included in my written testimony.
+ The agreement, in essence, contains all of the provisions
+which the community coalition that worked with them on the
+agreement requested, most importantly, commitments to
+affordable housing, small business lending, a Massachusetts
+advisory council and goals on diversity in hiring and awarding
+contracts.
+ Could Sovereign do more to mitigate the effects of its
+acquisition of Seacoast Bank, especially for southeastern
+Massachusetts? Absolutely. Does the agreement contain a plan
+for mitigating the effects of job loss? No.
+ Our work is not finished on the merger, and neither is
+theirs. We intend to work with them through the framework of
+this agreement and through the advisory council so that
+Sovereign Bank becomes a true partner and leader in
+southeastern Massachusetts. The fact that we have an agreement
+with them and an advisory council makes that continuing work
+possible.
+ As for Bank of America, in November of 2003, just after
+Fleet Bank announced that they were accepting an acquisition
+proposal by Bank of America, our community coalition proposed a
+Massachusetts-specific community investment plan to the bank
+based on what we understood are the community credit needs of
+our state. This proposal contained almost identical categories
+as those contained in previous Sovereign agreements and
+Citizens Bank agreements.
+ In February, after several meetings and intense discussions
+with Fleet Bank and Bank of America officials, the bank agreed,
+in writing, to a written Massachusetts plan. In the first few
+months of this year, Bank of America agreed to make several
+commitments on areas contained in our proposal, which I have
+again outlined in my written testimony.
+ We very much appreciate Bank of America's commitments to
+date and think the commitments are a good first step in
+partnering with Massachusetts communities. However, more than
+one year after Bank of America announced their plan to acquire
+Fleet, there are four extremely important outstanding issues on
+which Bank of America has not yet agreed to make commitments or
+set goals: Small business lending goals by loan type and area,
+goals for diversity in hiring, goals for diversity in awarding
+contracts, and the establishment of a formal Massachusetts
+community bank advisory council.
+ Without these goals set, Bank of America's promise to us
+hasn't been met. Without these goals set, there can be no
+written community investment agreement or plan with Bank of
+America that adequately attempts to serve the credit needs of
+the citizens of Massachusetts.
+ The information that Bank of America released to us this
+past Friday regarding their Massachusetts business strategy is
+not a plan for addressing the credit needs of low- and
+moderate-income individuals in Massachusetts; and in fact, the
+words ``low- and moderate-income'' only appear once, in the
+last sentence of the last paragraph of the last page of the
+document.
+ The information gives us a general idea about how the bank
+will conduct its business. What we want to know is how they
+plan to meet the credit needs of low- and moderate- income
+individuals and communities based on the categories set out in
+the CRA regulations. It's that simple.
+ As we mentioned, we appreciate the commitments that the
+bank has made to Massachusetts so far. However, Sovereign Bank
+and Citizens have been able to meet the standard established by
+our state in terms of being parties to solid community
+investment agreements. We only ask that Bank of America meet
+that standard as well, or even, as their advertising campaign
+suggests, that they try to achieve a higher standard reflective
+of their preeminent ranking in the financial services industry.
+ Lastly, regarding whether current laws provide sufficient
+criteria for the review of the impact of bank mergers on
+communities, we feel that they do not, and they are inadequate
+to ensure communities' interests post-merger.
+ First, CRA regulations should include an assessment of how
+well banks have met the credit needs of communities of color.
+ Second, there are two inadequacies in the Bank Holding
+Company Act which require that in determining whether to
+approve an acquisition application, bank regulators must assess
+whether the merging banks have complied with the CRA law in
+meeting the credit needs of a community.
+ The assessment under the law requires that the regulators
+only look to the past record of the two merging banks on CRA
+issues, not how they are going to meet CRA in the future after
+they have merged.
+ Secondly, there is no requirement that the regulators
+compare the performance after the banks have merged on whether
+they have met the requirements under the law under CRA and the
+Bank Holding Company Act; and therefore, there's no incentive
+for banks to take into account any diminishing of services,
+investment or lending post-merger.
+ So again, we thank the Committee very much for allowing us
+to submit testimony on these very important issues and for your
+coming to Massachusetts to hear us on these issues.
+ Chairman Bachus. Thank you.
+ [The prepared statement of Maureen Flynn can be found on
+page 288 in the appendix.]
+ Chairman Bachus. Ms. Hagins?
+
+STATEMENT OF FLORENCE HAGINS, ASSISTANT DIRECTOR, MASSACHUSETTS
+ AFFORDABLE HOUSING ALLIANCE
+
+ Ms. Hagins. Thank you for the opportunity to testify today,
+Chairman Bachus, Congressman Frank, and other Members of the
+Committee. We appreciate the willingness of the Committee to
+come to Boston for this field hearing. We particularly thank
+Congressman Frank for his strong support for the CRA and his
+successful efforts to encourage banks to make specific
+commitments to the community they serve.
+ My name is Florence Hagins, and I am the assistant director
+of the Massachusetts Affordable Housing Alliance. MAHA is a
+non-profit organization that works to increase public and
+private sector investment in affordable housing and to break
+down the barriers facing first-time home buyers.
+ We have signed multi-year CRA agreements with most major
+banks in the state detailing commitments to the SoftSecond
+program, which is the state's most affordable mortgage project,
+and has helped over 7,700 low- and moderate-income home buyers
+buy their first home. As the leading anti-redlining program in
+Massachusetts, we have also worked closely with groups such as
+the Mass. Association of CDCs, Fair Housing Center of Greater
+Boston, and Lawyers' Committee for Civil Rights.
+ On January 13, 2004, Bank of America signed an agreement
+with MAHA for 3,000 SoftSecond loans in Massachusetts over the
+next ten years. In addition, Bank of America made public
+commitments to other housing programs. They agreed to remain a
+member of the Federal Home Loan Bank of Boston. They agreed to
+remain fully invested in the Massachusetts Housing Investment
+Corporation.
+ Bank of America agreed to convert a portion of its loan
+commitment to the Massachusetts Housing Partnership to an $18
+million grant; and Bank of America agreed to participate in the
+Massachusetts Basic Banking program by offering low-cost
+checking and savings accounts.
+ On housing, Bank of America has made the right commitments.
+Bank of America has a chance, as they enter this market, to be
+the lender of choice for low- and moderate-income residents in
+Massachusetts, but it will take an aggressive commitment to
+better serve these markets.
+ Bank of America needs to hire more loan originators from
+diverse backgrounds; increase its marketing in low- and
+moderate-income neighborhoods; and provide good and timely
+customer service throughout the mortgage process.
+ We have had discussions with Anne Finucane of Bank of
+America, and we are in agreement that staffing levels for loan
+originators need to be significantly increased in the Boston
+market. We appreciate the commitment that Bank of America has
+made to increase its staffing levels in the mortgage area.
+ Chairman Bachus. Ms. Hagins, we're told that people in the
+back of the room can't hear; so I'm going to ask the panelists
+to pull the mike a little closer to you.
+ Mr. Frank. Put it right in front of your mouth.
+ Ms. Hagins.In addition, Bank of America senior management
+will need to emphasize the importance of increased production
+in the SoftSecond program.
+ In the first eleven months, we have seen mixed results
+under the Bank of America SoftSecond agreement. Bank of America
+has exceeded its commitment of 150 loans outside of the city of
+Boston by closing 165 mortgages, making them the number one
+lender in the program statewide.
+ In Boston, however, the numbers tell a far different story.
+Bank of America has closed 52 loans in the city of Boston
+against the commitment of 100 loans, making them only the third
+largest SoftSecond lender in the city of Boston.
+ MAHA has also reached agreement with Sovereign Bank prior
+to its merger with Seacoast for commitments to the SoftSecond
+loan program. Sovereign has committed to a total of 575
+SoftSecond loans during the next three years.
+ In 2004, Sovereign's commitment is for 75 loans in Boston
+and 100 outside of Boston. Through November 2004, they have
+closed 144 loans throughout the state, which makes them the
+second largest SoftSecond lender in Massachusetts. During the
+merger process, Sovereign officials were also willing to make
+specific commitments to New Bedford and the south coast region
+of Massachusetts.
+ We offer the following comments on the adequacy of the CRA.
+ One weakness of CRA, or at least as it is enforced by
+federal regulators, is that banks are not compelled to enter
+into signed written agreements with community groups. Many
+choose instead to make public commitments which do not include
+much in the way of detail.
+ Any other serious relationship between a bank and its
+customers, partners and vendors is typically in the form of a
+written agreement. CRA commitments should be no different.
+ CRA is a law that needs to be expanded to cover mortgage
+companies as well as banks. In Boston in 1990, banks controlled
+by CRA controlled 78 percent of the mortgage lending market.
+Last year, the bank market share percentage had slipped to 23
+percent. Yet banks covered by CRA lend to lower-income and
+minority borrowers at a rate more than double that of largely
+non-CRA-covered mortgage companies.
+ We oppose the move by the Office of Thrift Supervision and
+the FDIC to raise the small-bank threshold from $250 million to
+$1 billion, allowing many banks to eliminate the investment and
+service components of the three-pronged CRA test.
+ We support expanding CRA to include disclosure of race
+information on small business loan data and to specifically
+include areas such as diversity in employment and procurement
+for minority- and women-owned business enterprises.
+ We thank you for the opportunity to testify today and we
+would be happy to answer any questions.
+ Chairman Bachus. Thank you.
+ [The prepared statement of Florence Hagins can be found on
+page 307 in the appendix.]
+ Chairman Bachus. Mr. Cofield?
+
+ STATEMENT OF JUAN M. COFIELD, PRESIDENT, NEW ENGLAND AREA
+ CONFERENCE OF NAACP
+
+ Mr. Cofield. Good morning. I'm Juan Cofield, president of
+the New England Area Conference of the NAACP. The acronym for
+the New England Area Conference is NEAC and you will hear me
+referring to NEAC.
+ NEAC is the coordinating and governing body for the
+branches of the NAACP in the states of Rhode Island,
+Massachusetts, New Hampshire, Maine and Vermont. I want to
+express my sincere appreciation to Chairman Bachus, Ranking
+Minority Member Congressman Frank, and the other Committee
+Members for conducting this hearing here in Boston today. This
+hearing, in and of itself, has already had an impact on the
+delivery of banking services in this community.
+ NEAC is part of a loose coalition of non-profit
+organizations called the Community Advisory Committee, the
+acronym being CAC, formed to advocate for people of color and
+low- and moderate-income people in pursuit of improved banking
+services.
+ In general, my testimony is supported by the CAC. More
+specifically, I wish to indicate that the general thrust of my
+testimony has the support of the Lawyers' Committee for Civil
+Rights Under Law of the Boston Bar Association and the Fair
+Housing Center of Greater Boston.
+ To put my testimony in context, I would like to provide for
+you the vision and mission of the NAACP. The vision of the
+NAACP is to ensure a society in which all individuals have
+equal rights and there is no racial hatred or racial
+discrimination. The mission of the NAACP is to ensure the
+political, educational, social and economic equality of all
+persons and to eliminate racial hatred and racial
+discrimination.
+ NEAC and the CAC requested two commitments from Bank of
+America which relate to the bank's employment at all levels of
+people of color and women and the procurement of goods and
+services from businesses owned by people of color and women.
+ Statistical data will clearly show that the percentage of
+people of color and women employed by Bank of America at all
+levels, nationally and in Massachusetts, is not matched by
+these categories of citizens' percentage of the population. An
+even worse disparity is reflected regarding the percentage of
+goods and services purchased from people of color and women.
+ NEAC and the coalition have requested that Bank of America
+set a goal and develop a plan such that the bank's employment
+at all levels again of people of color reflect the percentage
+of people of color in the general population in the
+Commonwealth of Massachusetts. A similar request has been made
+regarding the bank's procurement of goods and services.
+ These disparities are certainly not unique to Massachusetts
+and Bank of America alone did not create the disparity in
+Massachusetts or in our great nation. It is a problem of our
+American society and economy.
+ However, Bank of America must be part of the solution. The
+lack of employment and business opportunities has contributed
+to economic destabilization in communities with a dominant
+population of people of color.
+ The Community Reinvestment Act begins by reciting
+Congress's three findings in passing the law. First, banks are
+required to serve the convenience and needs of the communities
+in which they are chartered to serve. Economic stabilization is
+a dire need in many communities of color. Adequate employment
+and business opportunities will greatly contribute to
+stabilizing these communities.
+ Since Bank of America in its normal course of business
+provides employment opportunities and opportunities for
+businesses to sell the bank goods and services, NEAC and the
+CAC maintain that the bank has an affirmative obligation under
+the CRA to provide these same opportunities on an equal basis
+to communities with dominant populations of people of color.
+ I aver that further evidence of Bank of America's
+affirmative obligation to provide employment and business
+opportunities is found in the investment test of the CRA
+regulations for large banks. The investment test evaluates the
+bank's community development investments. Of the four measures
+of a bank's investment, two are directly relevant: the bank's
+responsiveness to community development needs and the degree to
+which investments are not provided by other private investors.
+ Bank of America can present no reasonable argument that
+providing equal access to jobs and business opportunities in
+destabilized communities with a dominant population of people
+of color is not addressing a community need. Further, these
+investments are not being sufficiently provided by other
+private investors. NEAC and the coalition have sought a
+reasonable investment plan of employment and business
+opportunities from the bank to address these stark community
+needs.
+ To this point, Bank of America has not presented NEAC and
+the coalition with such a plan. Up to Thursday morning,
+December 9, discussions with the bank had been quite
+disappointing, to say the least. But on Thursday morning, I had
+a lengthy discussion with two senior bank officials: Doug
+Woodruff, president of CD Banking, Bank of America, and William
+Fenton, senior vice-president of Bank of America here in
+Boston. I am more hopeful today, as a result of that
+conversation, than I was prior to last Thursday, December 9.
+ The bank's attitude has been that it is developing a
+national plan and that Massachusetts will fit within that plan.
+It is a one-size-fits-all approach. However, this approach, in
+my humble and lay opinion, is not what the CRA intended to
+require.
+ CRA is the acronym for Community Reinvestment Act and not
+the Country Reinvestment Act. Any plan developed by the bank
+should be specific and tailored to the needs of the communities
+which each of you, our most honorable Congressmen, represent if
+the bank is providing banking services in your district.
+ By contrast, I would like to point out what Bank of
+America's two largest competitors in Massachusetts are doing.
+ Sovereign Bank of New England and Citizens Bank
+Massachusetts have made a commitment and are developing plans
+for their respective banks' employment at all levels and
+procurement programs of goods and services, which reflect the
+diversity of the Commonwealth of Massachusetts.
+ These banks did not simply say, ``Come in and let us show
+you what we plan to do.'' These commitments were the result of
+an openness of attitude, a willingness to provide the best
+service to the communities which they serve, and an extended
+period of negotiations.
+ I know that each of these banks is proud of their
+commitments. They feel that implementation of the commitments
+will enhance their ability to serve the community.
+Additionally, they believe that implementation of these
+commitments will grow their revenue and profits.
+ In particular, and because you are reviewing Sovereign
+Bank's acquisition of Seacoast Banks, I want to take this
+opportunity to publicly state, on behalf of the New England
+Area Conference of the NAACP and the other organizations whose
+views are reflected in this testimony, that Sovereign Bank New
+England has distinguished itself in developing a relationship
+with the Community Advisory Committee.
+ The bank recently signed a comprehensive agreement with the
+CAC which includes definitive language on workforce and
+procurement diversity to reflect the ethnic and gender
+diversity of the Commonwealth of Massachusetts. The bank, I
+believe, is a prime example of a bank attempting to serve the
+totality of needs of the community. The leadership of the bank,
+of the Sovereign Bank of New England gets it.
+ I do urge you, the Financial Services Committee of the
+House of Representatives, to move forward to strengthen the CRA
+in three important aspects.
+ One aspect is to ensure that major nationwide banks develop
+and implement plans that truly serve the totality of needs of
+the communities they serve. The communities that you represent
+will be the beneficiaries of such legislation.
+ Secondly, I would ask that you take action to provide
+specific language in the CRA to address the issue of ethnic and
+gender diversity. The issue of race continues as a serious
+problem in our nation. It is not too much to ask that a bank,
+in its normal course of business, be a part of the solution and
+not a part of the problem. The interest of our nation will
+certainly be enhanced.
+ Exactly eleven months ago today, I addressed the Federal
+Reserve Bank of Boston at its public hearing regarding the
+acquisition of Fleet Boston by Bank of America. At that
+hearing, I urged the Federal Reserve to defer a decision on the
+Bank of America's application for approval of the acquisition
+until such time that a definitive plan was presented addressing
+the full range of community needs. I continue to believe that
+such action would have been the proper course and the proper
+decision of the Federal Reserve Bank.
+ So third, I request that you strengthen the language of the
+CRA to provide for such a plan prospectively.
+ In closing, I am honored and, again, I do appreciate the
+opportunity to address the Committee on this important affect
+of your work. Thank you very much.
+ Chairman Bachus. Thank you.
+ [The prepared statement of Juan Cofield can be found on
+page 270 in the appendix.]
+ Chairman Bachus. Ms. Baldwin.
+
+STATEMENT OF IRENE BALDWIN, EXECUTIVE DIRECTOR, ASSOCIATION FOR
+ NEIGHBORHOOD AND HOUSING DEVELOPMENT
+
+ Ms. Baldwin. Good morning, Chairman Bachus, Congressman
+Frank, and other Members of Congress. I'm the executive
+director of the Association For Neighborhood and Housing
+Development.
+ We're based in New York City and we're a coalition of 93
+non-profit neighborhood housing groups. Our member
+organizations work in low- and moderate-income neighborhoods
+around the city, and they work extensively with almost all the
+area banks on a range of community development initiatives.
+ My testimony today will focus on the JPMorgan Chase merger,
+the community development commitments the bank made at the time
+of that merger, and how they've been implemented over time.
+ At the time of its purchase of JPMorgan in 2000, Chase was
+considered a leader in community development in New York City.
+They were probably the dominant bank in New York City in
+community development lending and investment. JPMorgan was also
+very prominent in community development, and both banks were
+very well respected by our member organizations.
+ We were very concerned about the JPMorgan Chase merger. We
+couldn't afford to lose the activities or programs of either
+bank, and we thought there was a very good chance that might
+happen out of the merger, particularly in the case of JPMorgan,
+which was the bank that was being picked up by Chase.
+ So we met with leadership of Chase during the time of that
+merger, we met with a vice-chairman for the retail bank, two
+executive vice-presidents, several other Chase staff, and about
+a dozen community group representatives.
+ At that meeting, the bank made a number of commitments.
+These are discussed in some detail in my written statement, but
+essentially the bank promised to keep doing what it had been
+doing in the two separate banks. We weren't asking for an
+expanded commitment; we were just asking that they not roll
+back or pull back from what they were already doing.
+ The main promises they had made to us were that all of the
+banks' community development programs would be coordinated and
+delivered through Chase's centralized community development
+group. We felt the community development group was very strong,
+and we wanted to make sure it survived the merger.
+ They also promised that the staff and programs of Morgan's
+CDC would be preserved; and further, they promised again that
+the separate levels of lending and investment of the two banks
+would be maintained after the merger. Again, we weren't asking
+them to do more; we were just asking them to promise not to do
+less.
+ We left that meeting very satisfied with the promises the
+bank made to us. We were confident that both Chase and Morgan's
+programs would continue intact.
+ After the merger was approved, however, the bank honored
+none of the commitments it had made to us. They almost
+immediately eliminated important community development
+programs, they cut their community development budget and
+staffing levels, and they began to break up the community
+development group.
+ So in this past year, when Chase then applied to purchase
+Bank One, we again submitted written comments to the
+regulators. These detail our experiences with the previous
+merger and also discuss how, as a result of the bank cutting
+back on programs, it was now less able to deliver services on a
+neighborhood level than it once had been.
+ Neither the bank nor the regulators responded to our
+written comments, including the issue we raised that Chase had
+not honored previous commitments.
+ So based on these experiences, it is our belief that
+current laws do not protect community interests after a merger.
+My written statement cites a number of areas where current law
+can be reformed. They're on Page 6 of my statement. Two of them
+echo what other witnesses have already said today. Currently
+regulators do not enforce CRA commitments, even those made in
+the course of a merger. We would urge the banks be held
+accountable for the CRA commitments they make.
+ Second, the application review process looks at past CRA
+performance, but does not require that banks provide forward-
+looking CRA plans. We would urge that banks develop detailed
+specific CRA plans for each of their local markets as part of
+their merger application. Again, additional recommendations are
+in my statement.
+ With a continuing trend towards mega-bank mergers, what we
+saw play out with JPMorgan Chase, we expect to see in other
+banks, too. It's very timely that Congress consider this issue
+and find ways to strengthen the CRA to better protect our
+communities.
+ Thank you.
+ Chairman Bachus. Thank you, Ms. Baldwin.
+ [The prepared statement of Irene Baldwin can be found on
+page 91 in the appendix.]
+ Chairman Bachus. Mr. Thall?
+
+ STATEMENT OF MATHEW THALL, SENIOR PROGRAM DIRECTOR, LOCAL
+ INITIATIVES SUPPORT CORPORATION
+
+ Mr. Thall. Members of the Committee, thank you for the
+invitation and opportunity to testify. My name is Mathew Thall;
+I'm the senior program director of the Boston Program of the
+Local Initiative Support Corporation, or LISC. I've been in
+that position for 13 years and previously was the executive
+director of a CDC in Boston for a decade.
+ LISC is the largest non-profit community development
+support organization in the United States. Since 1980, we have
+invested approximately $5 billion in 2,400 community
+development corporations working in and for low-income
+neighborhoods. This investment has entailed 147,000 affordable
+homes and over 22 million square feet of neighborhood
+commercial retail and community facilities space. In Boston,
+we've invested about $87 million over the past 24 years,
+leveraging about $725 million of other public and private
+investment, and helping to support over 6,000 affordable homes.
+ LISC does a good deal more than just finance community
+development. We invest in building the capacity of CDCs and
+non-profits. We often serve as a catalyst to change the local
+system and attract new investments in community development. I
+have included in my statement a few interesting examples of
+this type of work in Boston, in Chicago, in Los Angeles and in
+Winston-Salem.
+ I think I can say unequivocally that LISC would not have
+been able to accomplish everything it has accomplished without
+the Community Reinvestment Act. The CRA made it possible for us
+to develop strong relationships with banks, in Boston and
+nationwide. As the banking industry evolves, it becomes
+increasingly important to maintain a strong CRA in order to
+maintain those relationships and to continue the capital flow.
+ CRA has worked remarkably over the past 25 years fostering
+and building public-private partnerships around community
+development. It has helped to weave a network of federal
+programs into private investment, including HOME, the low-
+income housing tax credit, new market tax credit. It has been a
+very, very powerful tool for building low-income communities.
+ Now that partnership is in jeopardy. LISC is deeply
+concerned that a series of proposals from the FDIC and the
+Office of Thrift Supervision would begin to dismantle CRA and
+the public-private partnership CRA has represented.
+ OTS has already reduced the oversight of mid-sized thrifts
+with assets between $250 million and $1 billion. The FDIC has
+proposed to do the same for the banks it supervises as well as
+to grant CRA credit for rural community development activities
+that do not serve low-income people or places. Now the OTS is
+considering letting institutions ignore investments and
+services under CRA.
+ It is especially disturbing that OTS and the FDIC have
+acted on their own, without coordination with the Federal
+Reserve Board and the Comptroller of the Currency, discarding
+over 25 years of joint policymaking on CRA. Fragmented
+regulatory policies are not just confusing; they also invite a
+race to the bottom as banks switch charters to the most lenient
+regulation and the regulators compete to offer it. We fear that
+other destructive proposals may follow until CRA loses all
+significance. Struggling communities would suffer in many ways.
+ I have attached to my testimony a copy of an op-ed article
+by LISC's chairman, Robert Rubin, the former Secretary of the
+Treasury, and our president, Michael Rubinger, which appeared
+in the New York Times on December 4, 2004. The article lays out
+a compelling case for keeping CRA strong, and I request that it
+be included in today's hearing record.
+ The Committee has invited me to comment on Bank of
+America's performance to date on commitments that it made in
+connection with the merger with Fleet Boston.
+ First, I should say that Boston LISC's experience with Bank
+of America per se is still young. Bank of America has been a
+very strong supporter of LISC prior to the merger. I refer the
+Committee to the testimony of Michael Rubinger before the
+Federal Reserve earlier this year.
+ Bank of America has been a major and generous supporter of
+other LISC sites. Its staff have served on our local advisory
+committees, which are the local boards. Finally, Bank of
+America has directly financed and invested in CDC projects that
+have been ``seasoned'' by LISC's investments.
+ While Boston LISC is still building a direct experience
+with Bank of America, we have had many strong and positive
+experiences with its legacy institutions: Fleet Boston,
+BankBoston, Shawmut Bank, and BayBank, to name a few.
+ Several of Fleet's staff served on the Boston LISC advisory
+committee board and committees. LISC has done a tremendous
+amount of lending side by side with Fleet Boston in recent
+years. We have not only provided predevelopment loans to CDCs
+needed to get their projects ready to access financing provided
+by Fleet Boston, we have remained in a number of projects as a
+permanent lender with Fleet.
+ LISC would not stay in a deal as a lender subordinate to a
+bank that it did not trust and hold in high regard.
+ Bank of America has honored and in some ways strengthened
+the relationship we had with Fleet since the merger has
+occurred. We are partnering with the bank and the city of
+Boston on an initiative to address comprehensive community
+development needs in the Bowdoin/Geneva section of Dorchester,
+a neighborhood in Boston, a neighborhood that has often been
+overwhelmed by problems of poverty and crime. This was an
+initiative that the bank proposed, not LISC or the city.
+ Boston LISC is about to enter the final year of a $33
+million campaign to raise and invest funds in the
+neighborhoods, towns and cities in greater Boston. Bank of
+America has honored Fleet's commitment to that campaign and has
+reaffirmed its commitment to leadership of that campaign. We
+are delighted that Anne Finucane will be taking the reins of
+chairing that campaign in the next year.
+ In terms of concrete, measurable commitments, I believe
+that the merger of Bank of America and Fleet has definitely
+made substantially more resources available locally for
+community development. As part of the merger discussions, Bank
+of America agreed to convert a portion of a statutorily
+mandated loan to the Massachusetts Housing Partnership into an
+$18 million grant. There is no statutory or regulatory basis
+for securing this type of grant from an acquiring bank under
+Massachusetts law.
+ Certainly, our very talented and sophisticated advocates
+deserve much of the credit for this commitment. However, Bank
+of America was under no legal obligation to make such a
+commitment. And as far as I know, an $18 million grant by a
+bank to a state agency for community development and housing is
+unprecedented in this country.
+ $18 million for project financing, project and
+organizational support and technical assistance to non-profits
+will make a tremendous difference for a long time to come in
+supporting our collective efforts to develop more affordable
+housing and stronger communities.
+ I congratulate the Bank of America for this financial
+pledge, and I hope the bank will be recognized for this
+commitment and consulted on how these funds can be most
+effectively deployed throughout the Commonwealth.
+ Thank you again for the opportunity to testify.
+ Chairman Bachus. Thank you.
+ [The prepared statement of Mathew Thall can be found on
+page 328 in the appendix.]
+ Chairman Bachus. At this time, we will entertain questions
+for our panel, and I'll pose the first question.
+ We've heard testimony about commitments and pledges made by
+Bank of America. My first question would be, are you satisfied
+with the commitments and pledges? Not that they haven't been
+honored yet. We won't know whether they're honored until two,
+three, four years from now. But are you satisfied with the
+level of commitments and pledges?
+ And I'll start with you, Ms. Flynn.
+ Ms. Flynn. We're very satisfied with the commitments that
+have been made to date. The commitment, as Matt mentioned, to
+MHP is a great resource for non-profits to build affordable
+housing in Massachusetts. Their commitment to become a member
+of the Federal Home Loan Bank and other commitments that
+they've made to the SoftSecond program, they're wonderful.
+ But the commitments aren't complete, and so we have
+outstanding requests that we've made to the bank that they have
+not agreed to yet, and I've outlined them. Those are basically
+four----
+ Chairman Bachus. It does seem to me that the level of
+commitments and pledges has been--I think there's even
+agreement on this panel, that if they honor the pledges and
+commitments they've made, that would be very significant.
+ Ms. Flynn. In the areas of mostly affordable housing and
+investment in housing, but there's still outstanding
+commitments that they need to make.
+ Chairman Bachus. A lot of that is that this merger was
+already approved, so there's no obligation for them to do so.
+ Ms. Flynn. Well, under the CRA regulations, part of the
+lending test asks how they've met credit needs for small
+business lending.
+ Chairman Bachus. Right, the service and investment.
+ Ms. Flynn. And those goals haven't been established yet by
+the bank.
+ Chairman Bachus. But in some ways, I think I've heard
+testimony that maybe their commitments will go even beyond
+maybe what Fleet Boston was doing. Is that correct?
+ Ms. Flynn. We don't know, because they haven't outlined, in
+terms of small business lending, what those commitments are.
+ Chairman Bachus. My second question is, Ms. Baldwin talked
+about Chase and the fact that JPMorgan Chase made certain
+commitments, and I guess these are conversations with the bank
+officials. Were those reduced to writing, the ones that you say
+were not honored?
+ Ms. Baldwin. In the case of JPMorgan Chase, it was just a
+meeting. I summarized the commitments in writing, but they
+didn't put it in writing. I did, and sent it to them, and sent
+it to the regulators.
+ Chairman Bachus. You know, when you don't have it in
+writing, you learn in life that----
+ Ms. Baldwin. Yes.
+ Chairman Bachus. Have they denied that there were such
+conversations?
+ Ms. Baldwin. No, they never denied. I should have pointed
+that out. And usually we do get them in writing. Usually the
+bank--we tend to be a little informal, because even if we had
+it in writing, we're not in any place to enforce it; so we tend
+to rely on the word and the good faith of the bank leadership.
+And this was the first experience I had where the bank just
+sort of blatantly didn't do what it said it would do.
+ Chairman Bachus. But it's my understanding that some of
+this they submitted to the Federal Reserve, saying this is what
+we intend to do, which may not be a commitment. Is that true?
+ Ms. Baldwin. At the hearing on the most recent merger, they
+made a very broad-based commitment for $800 billion over ten
+years; and, I mean, I'd speak a little bit about how
+satisfactory those commitments are.
+ We have a one-page--all I know about that commitment is
+what I've seen at the Chase website. It's one page, and I don't
+know the details of it, so I don't know what they're going to
+be doing in New York City, which is how I define my community.
+ Chairman Bachus. So the Federal Reserve, in reviewing
+these, is not asking for any specificity in the commitments or
+pledges or asking for any----
+ Ms. Baldwin. I don't believe they even asked for
+commitments going forward, no.
+ Chairman Bachus. Just review and see what they have done?
+ Ms. Baldwin. I think so.
+ Chairman Bachus. Let me close with this. One thing that
+Bank of America has done that we had at Wachovia Trust--which
+is the second largest bank in the state of Alabama, and they
+actually made no commitments to preserve employment levels.
+They actually said, you're going to lose over a thousand
+employees, which is obviously a discomfort. But we see that
+going both ways, businesses where one buys another.
+ You've got a commitment here, at least a representation
+that's been made to the public through the press by the Bank of
+America, I believe, that the employment rate, or the employment
+totals in the State of Massachusetts by 2006 will be at
+premerger levels, which is a pretty substantial pledge or
+commitment. Do you wish to comment on that?
+ And I know, Mr. Cofield, you've asked that, as they do,
+that they try to either preserve or be fair to both gender and
+race in doing that. But any comments there?
+ I mean, that to me is a substantial at least representation
+that it is their intention that jobs won't be lost. Now, there
+may be some higher-paid jobs that are lost and lower-paid jobs
+that are replaced. Any comment on that?
+ Mr. Cofield. I can't comment on the pledge of the overall
+job creation. That, I think, more than anything else, was a
+release in the papers and not necessarily a pledge to the
+community advisory group.
+ Chairman Bachus. Of course, from a public relations
+standpoint, if it is released to the press and told by the
+press and it's out there, it's acknowledged by them, at least
+they're subject to----
+ Mr. Cofield. Sure, and I understand that, and I appreciate
+that.
+ The concern that I expressed about employment and
+procurement being reflective of the community is an important
+one; and I contrast Bank of America, who has not to date been
+willing to make any commitments or have any serious
+discussions, I would argue, about these two issues, I contrast
+that attitude with their two largest competitors here in
+Massachusetts. Those two largest competitors have had serious
+discussions with us, negotiations that resulted in commitments
+in those two areas that are reflective of the diversity of
+Massachusetts.
+ That's important, and I have to say that I think that's a
+function in part--I certainly appreciate the leadership of the
+banks, and I think there is a lot of credit that is due the
+leadership of these two banks, and in particular Sovereign Bank
+of New England.
+ But I also think it's a function of a bank that doesn't
+have to answer day in and day out to a community. If a bank is
+nationwide, it might be a little less receptive to responding
+to community needs in this manner; and I would hope that you,
+the Committee, would give that serious concern, because again,
+as I said, the CRA stands for Community Reinvestment Act and
+not a country-wide reinvestment act.
+ Thank you.
+ Chairman Bachus. And there certainly is a perception, I
+think, and a tendency, I think, for us to believe that a bank
+that is not locally owned or controlled may have a tendency not
+to be responsive.
+ At this time I'll recognize Mr. Frank, Congressman Frank,
+whose efforts, I think, in regard to these mergers have already
+lessened the impact, the negative impact on the community; of
+him and the Massachusetts delegation as well.
+ Mr. Frank. Thank you, Mr. Chairman. I guess lessening the
+negative impact is my goal for the next few years----
+ [Laughter.]
+ Mr. Frank.----so it's good to have had that experience.
+ Chairman Bachus. Or enhancing the positive.
+ Mr. Frank. You do what you can in life.
+ Let me say, first, I have a couple specific questions for
+Mr. Thall. I very much appreciate your thoughtful warnings
+about what will happen to CRA.
+ I've been a big CRA supporter; in fact, I put that article
+by Mr. Rubinger, into the Congressional Record. I was
+particularly struck by Ms. Hagins' comment that lending to low-
+income in general, and minority low-income mortgage groups, in
+mortgages, is twice as great for people covered by CRA as for
+people who aren't. This is very relevant data for us.
+ And as you point out, because of changes in the financial
+sector, more and more mortgages are being granted by people who
+are not banks, and the banks who are under CRA are competing
+with them. I do think that's something we should be addressing,
+that there ought to be an extending of that CRA requirement,
+because I think it has had virtually no negative effect and
+some positive effect.
+ So I will tell you that I did have a conversation with Mr.
+Powell from the FDIC, and he indicated to me that he accepted
+the fact that deciding that all rural activity was
+automatically CRA was not a good policy; and I think we may be
+able to at least re-establish that test, that low-/moderate-
+income test as a prerequisite in the rural area, but I
+appreciate that.
+ Let me just say one of the things about Sovereign which I
+appreciated, and that is, Ms. Flynn mentioned one of the
+important things for us is the affordable housing program of
+the Home Loan Bank system, which is a program created by this
+Committee under the really superb leadership of the late Henry
+Gonzalez, who was then Chairman. We created this program where
+a certain percentage of the profits of the regional Home Loan
+Banks have to be put into an affordable housing program.
+ With regard to Bank of America, the problem with the
+mergers goes to where the bank is headquartered, because when
+this program was set up, people weren't thinking that--I guess
+this used to be called the Banking Committee, and then it was
+changed to Financial Services.
+ Somebody said, are we ever going to change the name back? I
+said, yeah; but by that time, we may change it to the Committee
+on the Bank.
+ [Laughter.]
+ Mr. Frank. What you have with the mergers is that there's
+now a disconnect between economic activity generated by a bank
+in a particular region and the Federal Home Loan Bank that gets
+the credit for that, because it goes to the headquarters of the
+bank.
+ Now, one of the things that B of A did, and Maureen Flynn
+correctly gave them credit for that, was voluntarily to agree
+to take out an additional charter in the Boston area so that
+the money generated by B of A will go to the affordable housing
+program. Sovereign, to its credit, was willing to do that,
+because as a unitary thrift, as I understand it, they can't do
+it as easily. They've been working with us, and I'm very
+appreciative of Sovereign's working with us to try and enhance
+that.
+ But now on Bank of America, let me say, I guess you get the
+question: Is the glass half empty or half full? And the answer
+is yes.
+ [Laughter.]
+ Mr. Frank. As Maureen Flynn pointed out, with regard to
+housing, I am very pleased that Bank of America has been very
+responsive. I said to others, housing is probably the greatest
+thing we need here in our area because of the extraordinary
+housing prices; but we do need economic activity to go along
+with it.
+ Part of this may be a question of cultural difference. I
+understand for Bank of America to come into New England,
+sometimes things are done a little differently here. During the
+Democratic Convention, when some journalists were asking me why
+things seemed to be so hard-edged, people dealing with each
+other, I said, well, at some point we tend to do everything
+like we drive, in which you cut no one else any slack, but you
+get highly indignant if people don't cut you some.
+ On the other hand, we have some real concerns here, and the
+economic one is real; and I must say, it has not seemed to me
+that what you were asking for was unreasonable.
+ Let me ask both Mr. Cofield and Ms. Flynn: It seems to me
+that, in part, the issue is not so much the quantity of what's
+being requested, it hasn't been that people have said that's
+unreasonable; it's kind of a cultural objection to having it be
+specific. Am I correct? Does that seem to be part of our
+problem?
+ Ms. Flynn. Yes, that's correct. We're not arguing about the
+amounts of commitment, especially on the small business lending
+piece; but we want to know, where is the small business lending
+going to be made?
+ So, are there going to be loans in low- and moderate-income
+areas as the CRA calls for? Are there going to be loans of less
+than $100,000, again which is something that banks have to
+report on under the CRA regulations? And are there going to be
+loans--and this is perhaps the most important aspect to us--to
+companies with less than $1 million in revenue?
+ As CDCs, we have small business technical assistance
+programs for many of our CDCs that help very small businesses
+start and grow, and often those small businesses have a hard
+time getting credit. That's what we're looking for, is to meet
+the credit needs.
+ Mr. Frank. Let me say, I understand there's a tendency,
+always has been, to withdraw in a little bit of anger when
+people question our bona fides. I guess I would urge the banks
+that, you're dealing with people who have no particular reason
+to know you; maybe their life experience with large financial
+institutions hasn't been among their seven favorite memories.
+ I would hope that the banks and Bank of America, would
+distinguish between--if you're being asked to do something
+unreasonable, let us know. And I would say to Mr. Cofield,
+obviously when we ask for a commitment in terms of percentages
+in diversity in both hiring and procurement, obviously we also
+have an obligation to make sure that we can show that it's
+reasonable, and be available to help achieve those goals. We
+understand naming the goal doesn't mean that you're
+automatically going to be able to achieve it. You have to work
+together towards it.
+ But I would hope that people would not stand on the kind of
+ceremony and be offended at being asked to prove the bona
+fides. These are not personal relationships; this is not proof
+you love me. This is what has been an arm's-length situation,
+and there have also been these kinds of series of mergers, as
+Mr. Thall read off the list of entities that are now under the
+Bank of America roof. That's where we are.
+ Let me just ask a question of Ms. Baldwin, because you've
+been talking about the negative effects of the JPMorgan Chase
+merger on community reinvestment. What about, now, the addition
+of Bank One? Because this very big bank has just gotten bigger.
+What's the experience been? I know Bank One hasn't been
+operating in your area, but I know in the Midwest, it's
+particularly in that area, where the Chairman of our Committee
+is. What have you heard about the addition, or has that caused
+further problems; do you know?
+ Ms. Baldwin. It's a little early. Actually, technically
+Chase is buying Bank One, although it's playing out as if Bank
+One had bought Chase.
+ One of our concerns is that the retail headquarters is
+going to move to Chicago, and the difficulties we have now
+working with Chase on a neighborhood level we're just concerned
+might be more difficult if everybody we speak to is coming out
+of Illinois.
+ Mr. Frank. Let me just comment on that. I would hope all
+the banks would understand that it's a natural human tendency
+to feel more comfortable with people who are nearby, with
+people whom you know, who you think know you.
+ When these mergers happen and headquarters get moved
+further and further away, I hope the banks will understand that
+it is important to reassure people. They tell us there isn't
+going to be any real difference, et cetera. Well, then you
+shouldn't be reluctant to let people know, because the degree
+of unease that is cascading here is very significant.
+ Thank you, Mr. Chairman.
+ Chairman Bachus. Thank you, Mr. Frank.
+ At this time, Mr. Murphy?
+ Mr. Murphy. Thank you, Mr. Chairman; and thank you,
+panelists, first of all for the people that you represent, the
+thousands, perhaps millions that you represent, and your care
+and concern about them.
+ I'm pleased you bring these issues before this panel,
+because although this is the Committee on Banking and Financial
+Services, ultimately our concerns reach down to individuals
+like you represent to make sure that people have opportunities
+always to live under an equality of law and have opportunities
+to climb upwards.
+ I'd like to start out by asking if any of you were
+individually involved in some of the discussions referred to
+before, with Sovereign Bank and Citizens Bank.
+ Ms. Flynn. Yes. Actually, our three organizations were all
+involved in all of those negotiations.
+ Mr. Murphy. Let me ask about this: How long did that
+process take from the time that the merger actually was
+finalized at the board until you achieved some results and
+agreements on this?
+ Ms. Flynn. Well, the Sovereign negotiation wasn't pursuant
+to a merger; it was an extension of a previous commitment that
+they made. That agreement was almost complete a year after it
+began, but then it took a little longer than that, because
+there were some----
+ Mr. Murphy. A couple years?
+ Ms. Flynn. Almost two, I think.
+ And the Citizens one, I believe it was a lot shorter than
+that, but I'm not sure.
+ Mr. Murphy. How much shorter, would you say?
+ Mr. Cofield. Six months to a year. In a general sense, that
+was a general commitment made pretty quickly in both cases, and
+getting down to the specifics took longer in both cases.
+ One of, I think, the important distinctions is an attitude
+about working with the community groups. We saw it with
+Sovereign and Citizens Bank pretty quickly, if not immediately.
+There was an openness and an attitude that we were trying to
+get to a goal, and it was just a series of negotiations.
+ I have not seen that with Bank of America until this past
+Thursday, December 9; and as I said in my opening remarks, you,
+by coming here and having this hearing, has had an impact in
+and of itself.
+ Mr. Murphy. I have a feeling that's why we're here.
+ [Laughter.]
+ Mr. Murphy. I want to ask, try and lay this out: This
+merger really didn't begin until March of this year, so it's
+about eight months--excuse me; it wasn't really finalized until
+March of this year, so really it was eight months away.
+ Ms. Flynn. But we submitted our proposal in November right
+after the acquisition was announced.
+ Mr. Murphy. And during that time, between when the intent
+of the acquisition was announced and when it was finalized,
+were there any discussions that took place at all.
+ Ms. Flynn. Yes.
+ Mr. Murphy. So they didn't shut you out. I just wanted to
+make sure of that.
+ Ms. Flynn. But the discussions were around whether they
+were going to do a plan. The discussions with Citizens and
+Sovereign were about an agreement, a partnership, between the
+bank and the community.
+ Mr. Murphy. Was there somebody even assigned to talk with
+you in these negotiations?
+ Ms. Flynn. With Sovereign and Citizens? Yes.
+ Mr. Murphy. But also with Bank of America?
+ Ms. Flynn. Yes.
+ Mr. Murphy. I just want to make sure I'm understanding,
+because what you're describing is very, very important. In
+part, I want to make sure we're not--like we're in the third
+inning; we're not judging what's going to happen in the ninth
+inning.
+ But the other issue is, what you're describing is an
+important--I don't know if ``attitude'' is the right word, but
+an attitude of openness that you would like to see more of, at
+least as things have begun to happen.
+ Yes, Ms. Hagins?
+ Ms. Hagins. To be fair, when they came and met with us in
+November--this is Bank of America--we talked to them about the
+SoftSecond mortgage program, which Fleet had already been doing
+for a number of years since they came into Massachusetts. We
+had an agreement almost within a couple of weeks in November
+with the SoftSecond mortgage program.
+ Mr. Murphy. That's good to hear.
+ Ms. Hagins. Because it's a mortgage product that works
+well.
+ Mr. Murphy. So in some areas, they did move rather quickly;
+in other areas, you want to see their continued progress moving
+some of these, particularly the hiring practices and the
+availability of mortgage--I know in Pittsburgh, we went through
+some of this when Mellon Bank sold off all their branches to
+Citizens Bank.
+ It was locally of concern to them, the very same thing:
+What would happen to the local commitment? Who would be hired,
+and what jobs would be lost?
+ We found that, over time, growth was taking place. We also
+worried about the impact on all the other banks headquartered
+in the Pittsburgh region, some fairly sizable banks; wondered
+what would happen with those. Over time, I've seen a number of
+these things work out, and to a large extent because folks like
+yourselves remain vigilant to that.
+ I see my time is up. Thank you, Mr. Chairman.
+ Chairman Bachus. Thank you.
+ And, Mr. Watt, before you ask your questions, what we've
+done on this thing, normally what we would do is go by the
+Committee Members and those off the Committee; but the
+Committee felt like the Members from Massachusetts, whether
+they're on or off the Committee, we would go by seniority of
+all the Members here.
+ So the order will be Mr. Watt, Mr. Capuano, Mr. Meeks, Mr.
+Tierney, Ms. Lee--Capuano, Meeks, Tierney, Lee and Lynch. So
+that will be the order.
+ Later, as Members outside the state like Ms. Lee may have
+to catch a plane, we will allow them to go before other
+Members.
+ So at this time, Mr. Watt?
+ Mr. Watt. Thank you, Mr. Chairman. You've just reminded me
+how old I'm getting, if you start looking at it in those terms.
+ [Laughter.]
+ Mr. Watt. I've made five points that I want to try to make,
+not necessarily around questions.
+ First of all, I want to applaud Barney's role,
+Representative Frank's role, in this whole process.
+ Many of you probably don't know that the first news I got
+of the Bank of America/Fleet merger was from Barney. I had been
+in Detroit at a Democratic presidential debate, and I had been
+traveling all weekend, and then I was going from Detroit to
+Chicago for a meeting at the Board of Trade. The first person I
+ran into when I got to Chicago that morning was Barney Frank,
+with this white look about him, saying, your bank has taken
+over my bank.
+ Fortunately, the first time I had heard that, I heard it
+from folks in Florida when Bank of America went to Florida; I
+had heard it from folks in Texas when they went to Texas; I had
+heard it from folks in California when they went to California;
+and I had heard it in other contexts when First Union and
+Wachovia had gone to other places. So it's kind of a unique
+experience.
+ Chairman Bachus. We were also getting tired of it, you
+know.
+ [Laughter.]
+ Mr. Watt. But Barney's role in this, from that moment, we
+worked together to try to make sure that the commitments that
+were being made were genuine and that Bank of America lived up
+to the commitments that it made; and I want to applaud Barney's
+role in making sure that these hearings and the specifics of
+these commitments get lived up to.
+ Second, I want to applaud the panel this morning because
+you didn't come in talking about generalities; you recognized
+that specific commitments are talked about in communities where
+banks and people live; so every one of you, as you went down
+the roll, talked about the specifics of the communities that
+you represent.
+ I think that's an important challenge to make to Bank of
+America, because the comment about CRA not standing for Country
+Reinvestment Act but Community Reinvestment Act is an important
+one.
+ Third, I want to say that we have, in a sense, taken a lot
+of these kinds of things for granted in our Charlotte
+community, in our North Carolina community, from Bank of
+Charlotte to North Carolina National Bank to NCNB to Nations
+Bank to Bank of America.
+ There have been a certain set of expectations that we
+haven't even tried to document in our communities, because we
+have seen the dramatic impact that a financial institution,
+with good intentions and with lots of resources--in fact, three
+financial institutions--Bank of America, Wachovia and First
+Union, and now the combination of those two after the merger--
+can have on a community.
+ Bank of America and First Union and Wachovia have had
+transformative impacts on the skyline and the community fabric
+and the employment fabric and the procurement fabric of our
+communities in ways that--I mean, I could go on and on,
+including the neighborhood in which I live, when I was on the
+NCNB Community Development Corporation board, stabilizing that
+community.
+ But it's all been an assumed part of what would happen
+rather than a contractual part. And when Barney was talking
+about the specific written commitments, I could understand the
+difference, because it hadn't always been about signing an
+agreement; it's been about seeing the results of those
+commitments without even having the benefit of an agreement.
+ But Bank of America needs to understand that as it expands
+to other parts of the world where they don't have the benefit
+of that good will, there needs to be a different dynamic; and
+the same kind of commitments that have been made or the same
+kind of performance that has been reflected in our communities
+that we have taken for granted will be now expected to be
+reduced to writing and delivered upon in different locations in
+a different kind of framework. That's the cost of becoming a
+national bank: the lack of community confidence that it will
+just happen.
+ So my final point--and I'll follow this up with questions
+to the Bank of America representatives when they come--is that
+the commitment to CRA, the lending commitment to serve the
+credit needs of a community, the commitment to employment, the
+commitment to procurement, it seems to me has to be as basic a
+part of a merger and results evaluation of a financial
+institution as serving the wealthy investment people--I notice
+we're moving 300 jobs here to serve the wealthier people--or it
+has to be as basic a part of the commitment as, what happens at
+the bottom line?
+ Because that's what we expect banks to do in this country;
+and while it's not mandated except in the CRA from the lending
+perspective, there is an expectation that banks and every
+institution in our society will do their part to eradicate the
+disparities that exist in employment opportunities and business
+opportunities and small business opportunities and procurement
+opportunities because those disparities continue to exist.
+ So I didn't ask a question; I made a series of comments.
+But I hope this helps put in context that national statistics
+don't always tell the story of community reinvestment.
+Community reinvestment is evaluated in communities in which
+institutions live and work, and those specific kind of
+expectations have to be a part of achieving the global CRA and
+community expectations that we all want to have, do have,
+sometimes in not so supportive political climates or economic
+climates, but the expectations and aspirations are still there.
+ Chairman Bachus. Thank you, Mr. Watt.
+ Mr. Capuano, you're recognized for any comments or
+questions you might have.
+ Mr. Capuano. Thank you, Mr. Chairman.
+ First of all, I want to welcome you all here to Boston. We
+tried to do the best we could with weather, but hopefully it
+won't snow before you leave.
+ I want to thank all the panelists for being here, and I
+also want to make a brief commentary first.
+ We're going to talk a lot about the future, but there's
+also one segment of the people impacted by this merger that are
+not directly represented here, and that's the employees of the
+former Fleet and the new soon-to-be, or actually now, Bank of
+America. And I will have some questions for the people who
+represent the bank later on.
+ But I actually think it's too bad that we don't have
+somebody that we could talk to about employees, and that's a
+function of the fact that the financial services industry is
+not very well unionized. Therefore, they don't have spokesmen.
+And I take this opportunity to encourage those people that work
+for various large institutions like that to get together so
+that people like me can have a representative to ask questions
+that you're not really qualified to answer.
+ I also want to make a point--and I know that people on the
+panel know, but I want everybody to make sure that we are very
+clear--though we've said some good things about other banks,
+Citizens is run out of Scotland; Sovereign is run out of
+Pennsylvania. They are not local banks.
+ I actually find it refreshing that although they are not
+technically local banks, we treat them as if they are. I think
+that's a function of leadership, and more importantly, the
+authority that the local leadership has been given by their
+various corporate boards to actually run it as a local bank,
+and I think the question is still there relative to the Bank of
+America.
+ They have appointed some people that are local and that, as
+far as I'm concerned, are very good people that we can work
+with. I think, for me, the question is, do they have the
+authority to really act as a local bank? I think that just
+takes a matter of time to make that determination.
+ The questions I have really revolve around a document that
+I just got Sunday at 10:30 at night that I guess some of you--I
+assume all of you have seen it as of Friday, or most of you
+have seen it--something called the Community Development
+Strategic Business Plan from the Bank of America.
+ As the Chairman said earlier, I mean, some of the numbers
+here are pretty good. We've seen most of these numbers before,
+and it's great that affordable housing is going to get four
+billion one hundred eighty-five million dollars over the next
+several years. That's a wonderful number. Without having looked
+at the statistics as to whether that really is a wonderful
+number, I will accept it as such, because it's a huge number,
+and that's great.
+ Can any of you tell me where that money is going?
+ Ms. Flynn. Any of us panelists?
+ Mr. Capuano. Yes.
+ Ms. Flynn. No. We asked the question, what was included in
+that; and there was a little confusion around what was included
+within that category. So it seems to be affordable lending,
+some mortgage products, and some investment in rental and real
+estate projects; but we're not sure what----
+ Mr. Capuano. Have we defined the terms ``low'' and
+``moderate income''? Have they accepted them as certain
+definitions, or are they generic definitions?
+ Ms. Flynn. No, we don't know what the term ``affordable''
+means under this.
+ Mr. Capuano. So we don't know what towns they're going to?
+ Ms. Flynn. No.
+ Mr. Capuano. We don't know what category of people?
+ Ms. Flynn. No.
+ Mr. Capuano. Do we know whether these are homeownership or
+rental?
+ Ms. Flynn. No.
+ Mr. Capuano. So we just know a number.
+ Ms. Flynn. Right.
+ Mr. Capuano. What about small business? One billion three
+hundred fifty million.
+ Ms. Flynn. The same. We don't know any information; we
+don't know how many small businesses, how many loans, if it's
+going to cover the entire state, whether outside of Boston will
+be the beneficiary of any small business loans, whether smaller
+small business loans will be able to access this kind of
+credit.
+ Mr. Capuano. So we know a number, and that's about it?
+ Ms. Flynn. Right.
+ Mr. Capuano. I assume no one here is holding back
+information on this.
+ Ms. Hagins. Well, we have a commitment for ten years for
+3,000 mortgages, but it doesn't have a dollar figure.
+ Mr. Capuano. Mortgages to whom?
+ Ms. Hagins. To the SoftSecond mortgage program.
+ Mr. Capuano. To the program that already exists?
+ Ms. Hagins. Right.
+ Mr. Capuano. That's good. So that's a program we know is
+going to qualify, and we know how it's going to work. Good.
+ Again, I read the document; I've read it several times now,
+and it's a pretty good document. I like the numbers, I like the
+generic, broad-bush thing; but I'm kind of left a little empty.
+I mean, promote affordable housing production through a
+continuation of partnerships with the Mass. Housing Investment
+Corp. Great organization; they do wonderful work. Mass. Housing
+Partnership; again, great. Mass. Development, Mass. Housing,
+CDAC--do we know how much each of those organizations are going
+to get?
+ Ms. Flynn. We know just how much Mass. Housing Partnership
+has received, but that's a requirement under state law, for
+them to receive a certain amount of loan obligation. Bank of
+America did convert some of that loan obligation to grant, so
+we know how much that is.
+ Mr. Capuano. The thing I like is, the bank will convene a
+national advisory council made up of prominent public and
+private sector leaders throughout the Bank of America
+franchise. Could you tell me who the national advisory council
+would include? Any of you?
+ Ms. Flynn. We don't know.
+ Mr. Capuano. Any of your organizations?
+ Ms. Flynn. We don't know.
+ Mr. Capuano. I guess for me, it's a great document; there's
+really nothing I can criticize in this document; but, okay, now
+what? Have you had any idea of when we're going to get a little
+bit more meat on these bones?
+ Ms. Flynn. No.
+ Mr. Cofield. No.
+ Mr. Capuano. Just out of curiosity, when you did Citizens
+and Sovereign, which obviously I was involved in, did you get
+this level of detail or this lack of detail?
+ Ms. Flynn. We had an agreement with both of those banks,
+and they were probably six or ten pages each. I have copies of
+them here. They outline each of the areas that they are going
+to be lending in; the number of loans going to LMI areas, et
+cetera; the amounts of commitments to MHIC; the amounts of tax
+credits they're going to purchase.
+ Mr. Capuano. My final question, because my time is running
+out: Have you had any indication of when there might be meat
+added to these bones? I mean, are you meeting tomorrow to put
+some meat on this, or next week, or next month, or next year,
+or in my lifetime?
+ Ms. Flynn. We understand that this is the plan they
+promised us from Massachusetts.
+ Mr. Capuano. Thank you, Mr. Chairman.
+ Chairman Bachus. Thank you, Mr. Capuano. You probably
+should have been a lawyer.
+ Mr. Capuano. Would have made more money.
+ [Laughter.]
+ Chairman Bachus. At this time, Mr. Meeks?
+ Mr. Meeks. Thank you, Mr. Chairman.
+ And I, too, want to first thank all of you for your
+testimony today; but furthermore, I want to thank you for what
+you do every day, because what you do every day is looking out
+for those who may be less fortunate than most, and what you do
+every day is try to make sure people indeed have an opportunity
+to share in what folks call the American dream: that is home
+ownership, that is to have a job, a roof over their head, and
+that is to have a better life, to afford them the opportunity
+to give their children a better life than they had themselves
+when they were growing up.
+ So you should be commended for what you do every day. Most
+of your jobs I'm sure don't make you rich. You don't get the
+huge bonuses that others may get for what they do, but your
+commitment is what makes this country great, and I want to
+thank you for it.
+ Financial institutions and financial services, of course,
+coming from New York, it's the backbone of New York. I've heard
+my colleague Mel Watt talk about Charlotte. I know we're here
+in Boston, et cetera; but without financial services in New
+York, this city, and indeed this nation, could be greatly
+affected.
+ I can recall, about twenty years ago in New York we had six
+major national banks. Today, they're down to three. I mean,
+it's like we had, I think it was Citibank, Chase Manhattan,
+Chemical Bank, Manufacturers Hanover Trust, NatWest, and
+eventually Fleet Bank, and of course JPMorgan was there doing
+all of the high-end privileged services.
+ Then we had Citibank; Citibank is still Citibank. Manny
+Hanny was swallowed by Chemical. Chemical then melded with
+Chase. Chase then merged with JPMorgan, which now has merged
+with Bank One.
+ The thing that concerns me at some times is that maybe ten
+years from now we'll have one bank, one insurance company, one
+securities company, and all will be affiliated through Gramm-
+Leach-Bliley, which can have an effect on competition, and
+therefore on services that may be in the community.
+ Now, I understand that financial institutions have to make
+some money, and I'm not opposed to them doing that. In fact, I
+want to encourage and help them to do that.
+ But I have some concerns with reference to making sure that
+we continue in the climate of the negotiations that go on once
+we have these mergers. What I'm hearing from the panelists here
+is, it seemed to have been a different climate when you had the
+negotiations with Sovereign as opposed to negotiations that are
+currently going on.
+ So I guess, before I make that assumption, is that correct?
+Is there a different climate in the negotiating rooms that
+you've had with both?
+ Mr. Cofield. Certainly, on the two aspects that I spoke
+about, a very different climate. That's what I was making
+reference to when I referred to an attitude of openness. It's
+just quite different.
+ Ms. Flynn. I agree. The negotiations weren't pretty with
+Sovereign or Citizens. The bank pushed us; we pushed the bank.
+But in the end, what we got out of it was an agreement, a
+partnership, about how to meet low- and moderate-income credit
+needs in the Commonwealth.
+ So in the end, there was an agreement, a partnership.
+ Mr. Meeks. Now, let me jump to--and I know Mr. Cofield
+mentioned this, but I'll open it up.
+ In regards to either with Sovereign and now dealing with
+Bank of America, is there any specificity with reference to any
+goals in regards to procurement, in regards to employment of
+African-Americans and minorities and women?
+ Mr. Cofield. Yes, there is. And Maureen is absolutely
+right; that took some time and negotiation.
+ People of color represent roughly 20 percent of the
+population of Massachusetts--it's a hair under 20 percent--and
+people of color meaning blacks, Latinos, Pacific, Asian-Pacific
+and Native Americans. That represents roughly 20 percent, close
+to 20 percent, a hair less than 20 percent of the population of
+Massachusetts.
+ Our approach was, that diversity in Massachusetts ought to
+be reflected in the employment levels of the bank and in the
+way the bank does business; and we think that's reasonable,
+that the bank's business reflect the population.
+ We did achieve that aim with those two banks. With
+Sovereign, we first had a five-year agreement right after their
+merger; and because Sovereign was new here and we didn't know
+how they were going to work out, and they probably weren't so
+sure, the agreement called for a renegotiation of the five-year
+deal three years into the deal. So we had an agreement
+initially. That agreement was renegotiated over the past few
+months and signed a few days ago.
+ And let me say, to Sovereign's credit, what they've agreed
+to do is to sign a totally new five-year deal; so they have
+added on three more years beyond what was initially required in
+the five-year agreement.
+ Mr. Meeks. Are you anywhere currently with Bank of America
+in regards to goals?
+ Mr. Cofield. No, we are not; and that's what I referred to
+as disappointing.
+ I had at least a refreshing conversation with the two bank
+officials on Thursday morning, and it was an extended
+conversation. But there has not been a definitive discussion
+about the two issues that I've raised at all, and what they
+have referred to is their national plan.
+ That's why I refer to the CRA being a community-based plan
+and not a country-wide-based plan. I hope we would get there;
+there was no indication that we would get to the community-
+specific level in the discussion on Thursday. I did see a
+change of attitude in that discussion, and I'm hoping that it
+would get to the level of specificity that we have with
+Sovereign and Citizens.
+ They are well aware that their two largest competitors in
+Massachusetts have provided the specificity, and that's what
+we're looking for, and we think it's most reasonable. To have
+any other plan would suggest that you're going to continue to
+have an employment level that shows disparity, and a
+procurement level that shows disparity.
+ Mr. Meeks. My last question--I see my time is up--this is
+to anybody, because I haven't heard anyone speak of it, but I
+know particularly in communities where there are poor people,
+as far as education is concerned, one of the biggest
+disparities is the lack of understanding, in public schools in
+particular, where there's no financial literacy being taught.
+ So my question to anyone is, is there a discussion ongoing,
+whether it was with Sovereign or with Bank of America or with
+anyone, about a part of CRA being investments within
+particularly public schools in regard to teaching young people
+about financial--or making them become financially literate, so
+therefore they can take care of their money and understand
+better how to operate and deal on a personal level when they're
+banking with whatever the financial institution may be?
+ Mr. Cofield. Certainly some of the organizations that are a
+part of the Community Advisory Committee provide programs
+dealing with financial literacy. And I agree; I too think that
+that's very important.
+ To the extent that these institutions are supporting, by
+grant and in other manners, those organizations that are
+providing that program, I would answer yes.
+ Chairman Bachus. Thank you, Mr. Meeks.
+ Mr. Tierney?
+ Mr. Tierney. Thank you.
+ Thank you, Mr. Chairman. I want to thank you for working
+with Congressman Frank to bring this hearing to Boston and the
+Massachusetts area, and I want to thank you also for allowing
+me to join the Committee, and all of the other Members for
+their courtesies in terms of letting me be here, as well as the
+order of speaking; and I appreciate that a great deal. I thank
+all the witnesses for their testimony and for what you
+contribute to our life around here.
+ I seem to hear over and over again that this is a situation
+where we need a good negotiation to be conducted on the
+important matters, and that where you've had that negotiation,
+everybody has benefitted. It's been good for the banks, good
+for the groups for which you advocate, and good for the
+community.
+ Somebody described--I don't know if it was Ms. Baldwin or
+who it was that said it--there was a push and shove, push with
+Sovereign, Sovereign pushed back, and the same with Citizens.
+ It appears to me here that in the past, Bank of America
+doesn't like being pushed, either because they think they're
+too big for it or because they haven't yet focused on the local
+idea in how allowing this to go on is really going to be
+important for this region and for the local aspect of this. So
+hopefully we can ask some questions about what the attitude
+situation is at the bank when we have those witnesses here.
+ I would like to ask just two questions.
+ One, Mr. Cofield, when you talked about race, which I think
+is important, how would you propose that the current law be
+changed in order for us to address the continuing concerns
+regarding that issue?
+ Mr. Cofield. It is my firm belief that we should be working
+towards a goal in which race is no longer an important issue in
+our nation and in our communities.
+ I would like to, at some day, see that there's no more of a
+need for an NAACP, that we as a nation have gotten beyond the
+issue of race.
+ I truly believe that if we're going to get anywhere near
+there, we need to work towards a solution that ends disparity
+and not supports disparity; and that's what I'm trying to
+convey and is the thrust of my presentation. We need a program
+that doesn't continue to support disparity.
+ That's the distinction that I've seen today between our
+dealings with Sovereign and Citizens. I think both of them get
+it, and I do give a lot of credit to the leadership of both. We
+just haven't seen it today.
+ Mr. Tierney. Can I interrupt you? Only because I'm limited
+in time, and I want to do this as respectfully as I can; but
+how specifically are we to change the law? I think your goal is
+exactly on point. But is it the law that we need to change, or
+is it the enforcement aspect?
+ Mr. Cofield. It's probably both; but certainly as it
+relates to the law, in my opinion, there ought to be specific
+language in the CRA that requires an institution, when it goes
+or is already in a community, that it set up programs to
+reflect the racial and gender disparity in both of those areas,
+in employment and in procurement.
+ And I think that's rather easy. There is available census
+data that shows the diversity of a community, and in my opinion
+there ought to be specific language in the CRA regulations, in
+the CRA statute, that requires that a bank, in operating in a
+community, reflect the diversity in that community.
+ Mr. Tierney. Thank you. And then I suspect that that
+wouldn't do much good unless we had some enforcement mechanism
+on that after the merger on that.
+ Mr. Cofield. Absolutely.
+ Mr. Tierney. Ms. Flynn, let me ask you the same question,
+but this time with regard to the small business lending. What
+changes in the statute do you think are necessary to allow us
+to address the concerns that some institutions may not be
+focusing on how they're going to distribute small business
+lending?
+ Ms. Flynn. I think the statute, as written, is pretty
+broad. It says that banks should affirmatively try to meet the
+credit needs of the communities in which they serve.
+ So even issues around race and how they are going to serve
+communities of color could be met under the current law. It's
+how the law is interpreted under regulation.
+ Right now, there is an emphasis in the regulation on
+serving the needs of low- and moderate-income communities, and
+that's great; but it doesn't exclude the need to look at how
+communities of color have been served.
+ So if the regulations were tweaked to be more specific
+about the communities and individuals within the community that
+should be served by the banks, that would be an improvement.
+ Secondly, on the small business aspect, again, the banks
+must report under CRA how they've done on those three
+categories of small business lending. So it's there, but
+perhaps a greater emphasis on that part of the test in awarding
+grades on CRA would be beneficial.
+ Mr. Tierney. Thank you very much.
+ Mr. Chairman, thank you again.
+ Chairman Bachus. Thank you.
+ Mr. Lynch?
+ Mr. Lynch. Thank you, Mr. Chairman.
+ I have a statement I'll enter into the record, in the
+interest of time; but I do want to say, if I could go back to
+Mr. Frank's opening statement, he talked about the rhetorical
+question about what Congress's rightful role here is in
+requiring a private entity or private entities to make such
+sizable contributions to the public good and in some cases of a
+charitable nature.
+ I just want to emphasize or re-emphasize his conclusion
+that government has played a significant role in creating banks
+of this size. We have enhanced and protected the position of
+Bank of America. We have seen them acquire a number of banks,
+and now they have become so large and so overpowering and so
+overwhelming to the average citizen, and now even the average
+community, that I think it is entirely reasonable for citizens
+and their representatives to come to Congress to ask Congress,
+that created these conditions of powerlessness in many
+communities, to be their champion and to speak on their behalf.
+ I just want to thank the panel for measuring the unmet need
+in their communities and coming forward and articulating so
+well on behalf of all of our communities, of color and of need,
+and helping us to close the loop, if you will, with the Bank of
+America and Sovereign as well in terms of addressing that
+inequity in power between our local communities and this bank;
+and also somehow keeping that close connection between our
+banks and those local communities so that that community
+connection is not lost when these banks, as Bank of America has
+become a bank with over a trillion dollars in assets, and a
+far-flung empire from California to Boston and everywhere in
+between. It's very difficult for local communities to get
+response and to remain a viable priority in the eyes of such a
+huge organization.
+ So I want to thank the Chairman, and I want to thank my
+colleagues in the Congress for honoring us, really, and giving
+this wonderful courtesy to come to Boston, to my district.
+ I also want in particular to thank Ms. Hagins for her work.
+I grew up in the Old Colony housing projects not too far from
+here, and I know how important that SoftSecond mortgage program
+is for a lot of my constituents who are still struggling to buy
+their first home.
+ That first homebuyer program is a great program, and we
+need to see more of that continue; and if it were not for the
+work that is being done by Ms. Hagins and others who are here
+today representing our CDCs and affordable housing advocates,
+this need would be lost. It would be lost in the shuffle, and
+the problem would grow worse, not only in the city of Boston
+that I represent, but also in the city of Brockton that I
+represent that is about 40 minutes from here, and all the towns
+in between.
+ So I appreciate the good work being done by this panel and
+the spirit of cooperation we've seen from Bank of America and
+Sovereign thus far.
+ Thank you.
+ Chairman Bachus. Thank you.
+ Ms. Lee?
+ Ms. Lee. Let me first thank our Chairman and also
+Representative Frank for calling this hearing and for our
+panelists, for your very succinct testimony.
+ Of course, I have much history with Bank of America, going
+way back to before its leaving San Francisco and Oakland.
+During the late '80s, mid to late '80s, in low-income/moderate-
+income communities in my area, B of A unfortunately began to
+leave; it wasn't profitable enough. We saw then the rise of
+predatory and payday lenders, and there was a big void in the
+Bay Area as a result of that.
+ Then of course, unfortunately, with the move to Mr. Watt's
+district, we still haven't recovered from the negative economic
+impacts in terms of employment and really a turnaround in terms
+of what we had hoped to take place with regard to economic
+investment and compliance with CRA.
+ A couple of things I'd like to just ask panelists.
+ First of all, in any financial transaction between a
+consumer and a financial institution or a credit card lender or
+any organization, the consumer is required to live up to their
+commitments as they engage in these negotiations and these
+agreements. There's a penalty if they don't live up to their
+commitments.
+ With regard to CRA--and I've heard this over and over and
+over again--commitments are made during the merger process;
+they may or may not be specific; but after the merger takes
+place, it's like you would never believe there were any
+commitments made.
+ We heard during this last election the notion of values,
+that ethics was very important; and I'm just wondering--and a
+consumer would be considered--you know, that behavior is
+considered unethical.
+ I'd like to just ask the panelists how you viewed not
+living up to a commitment in order to get a deal done, and
+then--and I'll ask the banks this, also--then say either we
+didn't make the commitment, we did make it, it wasn't what you
+thought it was, we need to go back to the drawing board.
+ What are the ethical kinds of dimensions of that that we
+really need to look at, aside from the legal aspects? Which I
+think there should be penalties, quite frankly; if in fact
+organizations and financial institutions say they're going to
+do something, then they should do it. But beyond that, how do
+we look at the correctness of that just in terms of American
+values?
+ Ms. Hagins. I know we have written agreements with all of
+the banks that do the SoftSecond mortgage multi-year
+commitments. No, we can't go to court and use them, but we hope
+that they would live up to those commitments. We meet with the
+banks every year to make sure that they are on tune to do the
+number that they've agreed to do.
+ We will hold a community meeting, as we did--the last one
+was two years ago with 1,500 people in the room--and they have
+to be accountable to those people. So we try to make them
+accountable in that way, because we don't have any legal
+recourse other than that.
+ Mr. Frank. That does include the Bank of America in this
+case, correct? They have a written agreement.
+ Ms. Hagins. Right, they have a written agreement for ten
+years for 3,000 loans for the State of Massachusetts.
+ Mr. Cofield. Congressman Lee, I do see it as a moral
+commitment. And the role of the Community Advisory Committee
+and the organizations that compose that loose-knit coalition is
+to stay in place; one, first to negotiate what we believe is a
+reasonable agreement with the institutions, and then to work
+with the institutions to help them achieve the goal.
+ And generally that's the way it has been working here;
+sometimes better than others, but that's the way it has worked
+here, as we have reached these agreements, and the CAC stays in
+place and sees it as its role; and the banks that we have dealt
+with generally have seen that as a positive thing, so it has
+worked well.
+ But clearly, we believe that it's certainly a moral
+commitment, if not a legal commitment.
+ Ms. Lee. Ms. Baldwin, can you comment?
+ Ms. Baldwin. Yes. I personally have had a lot of
+frustration with our experiences with JPMorgan Chase. I'm not
+naive, but I was sort of shocked that a reputable institution
+just wouldn't do what it said it would do.
+ Usually the discussion is around, well, gee, maybe we
+misinterpreted our various commitments, where the bank is
+saying they would do A and they thought they were honoring it,
+and we had a different idea in mind.
+ Most often we do get letters in writing, saying they'll do
+certain things. I have no idea if those are legally enforceable
+or not. And banks generally--where I run into difficulty is
+monitoring. I've had some banks tell me, yes, we're doing what
+we said we would do; but we won't give you the line-item detail
+on what these community development loans were. You just need
+to trust us that we're doing it.
+ The other issue I have is that although these commitments
+aren't required to get the merger approved, they announced them
+in the course of the merger. So I do think, since that was the
+context they played out, the regulators really should look at
+it and hold them accountable to honor what they were doing.
+ Ms. Lee. Should past compliance with any type of CRA
+progress be part of the criteria for a merger, or is it only
+prospective? Or should it be just prospective?
+ Ms. Baldwin. Well, it's actually overweighted on past
+performance; and my sense, from when I read the approval
+orders, they rely very heavily on CRA performance evaluations.
+Those CRA performance evaluations I don't think look
+specifically at how banks have honored existing CRA
+commitments. I'm not sure.
+ But there's no requirement that going forward, that any of
+these banks do a specific CRA plan.
+ Ms. Flynn. I think one way to deal with this issue is, on
+the next exam after a bank, two banks have merged, on their
+next CRA exam, to bring this up as an exam question, if you
+will, that the banks should be graded on immediately after they
+merge so that they are held accountable to the promises and the
+commitments that they made before they merged.
+ Ms. Lee. Thank you very much.
+ Chairman Bachus. Thank you very much; and Mr. Frank, as he
+said, your testimony was very helpful. We appreciate your
+attendance here today.
+ At this time we'll call our second panel.
+ Our second panel is Ms. Anne Finucane--is that correct?
+ Ms. Finucane. That's right.
+ Chairman Bachus. You were formerly with Fleet Boston, and
+are now the president of Northeast Bank of America.
+ Ms. Finucane. That's right.
+ Chairman Bachus. And Mr. Joseph P. Campanelli.
+ Mr. Campanelli. Yes, sir.
+ Chairman Bachus. Chief operating officer of Sovereign Bank,
+New England Division, and Vice Chairman of Sovereign BankCorp.
+ Mr. Campanelli. Yes.
+ Chairman Bachus. So we welcome both of you.
+ As you probably heard the first panel, and I think they
+both referred to some of their discussions with you all, and I
+think were very favorable of some of your activities. So you're
+welcome to this hearing.
+ Ms. Finucane, we'll start with you.
+
+ STATEMENT OF ANNE FINUCANE, PRESIDENT, NORTHEAST BANK OF
+ AMERICA CORPORATION
+
+ Ms. Finucane. Good morning, and thank you. Thank you,
+Chairman Bachus, Ranking Member Frank and the Members of the
+Committee.
+ Can you hear me?
+ Chairman Bachus. Bring it a little closer. It won't sound
+natural, but it is.
+ He keeps saying I don't sound natural.
+ [Laughter.]
+ Chairman Bachus. It doesn't do anything about accents.
+ Ms. Finucane. Good morning, Chairman Bachus, Ranking Member
+Frank, and Members of the Committee on Financial Services. My
+name is Anne Finucane, and I serve as the president of the
+Northeast region for the Bank of America. Ken Lewis, our
+president and CEO, has asked me to convey his regrets. Since he
+is attending our company's previously scheduled board meeting,
+he was unable to be with us here today. He has asked me to
+testify on his and our company's behalf.
+ As a brief preamble, I'd like to state that as a result of
+the merger between Bank of America and Fleet Boston Financial,
+Massachusetts and the rest of the Northeast now serve as a key
+operational base for one of the country's premier financial
+services companies by almost any measure: number of customers,
+number of people employed, distribution, products and services,
+earnings and philanthropy.
+ Going into this transaction, we understood the important
+role that Fleet had played in fueling the local economy and
+enhancing the vibrancy of our communities as an employer, a
+lender, an investor, a philanthropic donor, a sponsor, and a
+community partner. As Bank of America, we are committed to
+continuing this important leadership position.
+ In negotiating this merger, both Chad Gifford and Ken Lewis
+agreed upon unprecedented initiatives in the area of employment
+and community development as well as philanthropy for this
+region's benefit. Each of these initiatives far exceeds what
+Fleet could have delivered if it had continued on its own
+separate path.
+ Now I would like to address the three primary questions
+posed to the Bank of America by the Committee.
+ On the question regarding jobs and employment levels, we
+take very seriously our commitment to maintain the premerger
+employment level of 17,900 full-time employees in New England.
+We believe that this, too, is an unprecedented commitment.
+ As of October 31 of this year, there were 15,000 full-time
+equivalent employees in New England, representing a loss or
+reduction of 2,900 associates, which essentially covers the
+merger-related lay-offs.
+ We recently announced plans to add 400 employees in our
+wealth and investment management headquarters in Boston, and
+another 700 more in Rhode Island, for a total of 1,100
+additional full-time equivalent positions in New England, all
+announced in a four-month period. That puts our New England
+employee total at 16,100 to date, or a net reduction of 1,800
+since the time of the merger.
+ We will meet our commitments to the 17,900 employment
+number by 2006 relying on the same approach we have used to
+bring the 1,100 positions I just mentioned back to this region,
+which we announced in the last four months.
+ As for our Bank of America associates in the Northeast, we
+offer job opportunities, a comprehensive work life benefits
+program and new employment benefits previously unavailable to
+our Fleet associates. We are on our way to returning to
+premerger levels of employment.
+ On Question No. 2 regarding our commitments: Bank of
+America may be new to the Northeast, but like Fleet, the bank
+has a long tradition of growth through mergers. And at the
+heart of our experience is this philosophy: A strong business
+depends on a strong local community and a strong local business
+climate. We believe that we have an outstanding track record of
+putting this belief into action; and just by way of example, we
+are demonstrating our commitment to the Northeast by targeting
+$100 billion of the new $750 billion community development goal
+to this region.
+ During the course of developing these goals, we met with
+more than 100 community groups; and much of their input is
+reflected in the development of these goals. A great deal of
+progress has been made; and just to use Massachusetts as an
+example, we have committed to $406 million in loan financing,
+$18 million in grants for the Mass. Housing Partnership, $200
+million in community development loans to the city of Boston.
+ We agreed to continue membership in the Federal Home Loan
+Bank of Boston to originate 3,000 mortgages over the next ten
+years with MAHA and to maintain a $20 million plus loan pool
+with the Massachusetts Housing Investment Corporation. And we
+have outlined our community development Massachusetts goals by
+category with an overall 24 percent lift over what we did at
+Fleet in the same time period.
+ In addition to our commitments to employment levels and to
+community development, we have committed not just to maintain
+but to increase our charitable giving in support of building
+healthy and vibrant neighborhoods. In 2004, Bank of America
+will have invested more than $9 million in philanthropy and
+community sponsorship funding for Massachusetts alone, which is
+more than we had done in 2003 as Fleet alone, focusing both on
+giving to large and small organizations, including a $1 million
+gift to Children's Hospital, a $1 million gift to City Year,
+$60,000 to the mayor's Main Streets program, and $200,000 each
+to Stride and the Lawrence Community Works program through our
+Signature Neighborhood Excellence Initiative.
+ And if there are still concerns, consider this: that each
+bank on its own, Fleet and Bank of America, earned outstanding
+CRA ratings and exceeded our community commitment goals as
+individual banks. Bank of America is the number-one SBA lender
+in the country and the number-one SBA lender to minorities. We
+are the number-one mortgage lender to minorities as well.
+ In 2003, Bank of America spent more than $620 million with
+diverse suppliers, and we expect to exceed that goal in 2004.
+Just last week we were named the top corporation for
+multicultural business opportunities of 2004 by more than
+350,000 diverse business owners.
+ Finally, on Question No. 3, the adequacy of current laws,
+let me turn to the merger approval process in connection with
+the Fleet/Bank of America merger.
+ We filed applications or notices with four federal
+agencies, more than 30 state agencies, several self-regulatory
+organizations, and more than two dozen foreign countries. We
+participated in four public hearings in three different states
+involving more than 200 witnesses, and we responded to nearly
+400 comment letters.
+ The approval process spanned more than five months, with
+the last approval received the day before our scheduled merger
+date. Certainly an exhaustive process, but one we can
+appreciate.
+ In our opinion, there are adequate measures in place to
+ensure that a bank honors its public pledges. Further, we
+recognize that the more favorably customers view their bank,
+including its role in the community, the more likely we are to
+retain and grow their business. This is a premise underlying
+the way Bank of America has operated across the country.
+ In conclusion, I'd like to emphasize one key fact: that the
+new combined bank, the new combined company, enables us to do
+more for the New England region, more for Massachusetts, than
+Fleet Boston Financial could have done as a stand-alone
+company.
+ Thank you.
+ Chairman Bachus. Thank you.
+ [The prepared statement of Anne Finucane can be found on
+page 277 in the appendix.]
+ Chairman Bachus. Mr. Campanelli.
+
+ STATEMENT OF JOSEPH P. CAMPANELLI, PRESIDENT AND CHIEF
+ OPERATING OFFICER, SOVEREIGN BANK, NEW ENGLAND DIVISION, AND
+ VICE CHAIRMAN OF SOVEREIGN BANKCORP, INC.
+
+ Mr. Campanelli. Chairman Bachus, Ranking Member Frank,
+Congressmen Capuano, Tierney, Lynch, and Members of the
+Committee, on behalf of Sovereign Bank New England and
+Sovereign Bancorp, I'd like to thank you for this opportunity
+to speak before you this morning. Along with my written
+remarks, I have provided written testimony for the record.
+ During the next few minutes, I'd like to address the
+questions you have posed concerning the acquisition of Seacoast
+Financial Services Corp. with regards to jobs, benefits of the
+acquisition, and commitment to our community.
+ Since Sovereign entered the New England marketplace almost
+five years ago, due to the merger of Fleet and BankBoston, we
+have grown organically and through two acquisitions in the
+region: Seacoast Financial and First Essex Corp. Our
+acquisition strategy has been to gain a presence in key markets
+and to better serve our existing customers and prospects.
+ Sovereign recognizes the critical importance of job
+creation to the continued development of our communities.
+Putting aside the impact of our acquisitions, Sovereign
+employment levels have grown in Massachusetts by approximately
+4 percent per year. We are proud of the fact that we continue
+to grow our core job base here and anticipate continuing to do
+that in the future.
+ Prior to the Seacoast acquisition, we projected that
+approximately 74 percent of the employees would be retained.
+All branch staff and other personnel working with customers
+would be included in those retained.
+ We realize the potential hardship the loss of a job can
+have on an individual and their family. Sovereign promised that
+we would consider former Seacoast employees first in filling
+any open positions throughout our company. Following the
+acquisition, we retained 74 percent of Seacoast's positions.
+ Those not offered positions received a severance package,
+which includes severance payments, continued health, dental and
+life insurance benefits for up to one year, job training, and
+outplacement services.
+ To date, we have placed 20 impacted employees in jobs at
+Sovereign, and we will continue to give former Seacoast
+employees priority in all future hiring.
+ There are benefits as a result of the acquisition for the
+former customers and communities. Our customers receive a wide
+array of products and services previously not available to
+them. They have access to additional branches and ATMs; they
+have customer-friendly products, including totally free
+checking for both retail and small business customers; and they
+have additional conveniences of enhanced online banking
+products.
+ Businesses also benefit by having access to our extensive
+cash management products, trade finance, payroll and merchant
+services, saving them time and money.
+ I'd like to now address the community commitments that
+Sovereign has made.
+ Sovereign is proud of our track record of meeting or
+exceeding our commitments. I will also note that Sovereign
+received an outstanding ranking in our most recent CRA
+examination. In all of our acquisitions, we have not exited any
+communities, and we have experienced growth in every market we
+serve.
+ Recently we reorganized our management team to get closer
+to communities we serve, with local decision-making and local
+accountability. Every decision that relates to communities in
+Massachusetts is made in Massachusetts.
+ Here is a situation where one and one equals more than two.
+Prior to the acquisition, Sovereign and Compass Bank had made
+local commitments totaling $450,000 in charitable giving. After
+the acquisition, Sovereign has committed a total of $600,000
+per year over the next five years, well over the previous
+commitments of the combined banks.
+ In addition, Sovereign has made an equity investment of $1
+million in the Southeastern Economic Development Corporation in
+Taunton, exceeding previous bank commitments by 30 percent.
+ We had made commitments to Mass. Affordable Housing
+Alliance to originate SoftSecond mortgages to first-time home
+buyers. We have improved our ability to serve those customers
+by locating mortgage originators and agents in offices in
+Roxbury, Massachusetts.
+ In an effort to serve more low-income homeowners, we are
+committed to work with the Federal Home Loan Bank and Members
+of Congress to get direct access to affordable housing programs
+through the Boston Federal Home Loan Bank.
+ Sovereign has established community advisory boards in all
+the regions we serve. Through them we work collaboratively with
+our communities. We are planning on expanding our boards from
+two to five over the next year. We truly believe that a bank
+needs to listen to the concerns of the community, and must have
+a mechanism in place, such as advisory boards, to address those
+concerns.
+ Sovereign is proud of its record of being in and of the
+communities where we live and work. We look forward to
+continuing to provide exemplary products, programs and services
+which will strengthen our customers, our community, in turn
+strengthen Sovereign Bank.
+ Once again, thank you for inviting me to speak before you.
+I'm happy to answer any questions you may have.
+ Chairman Bachus. Thank you.
+ [The prepared statement of Joseph P. Campanelli can be
+found on page 110 in the appendix.]
+ Chairman Bachus. Ms. Finucane, what new benefits have come
+to consumers of Fleet Boston? What have they gained as a result
+of the merger with Bank of America? And what has the consumer
+response been to the new bank? I know Mr. Campanelli said that
+deposits in the accounts have increased.
+ Ms. Finucane. Well, through research, we have discovered
+that more than 20 percent of our customers, the former Fleet
+customers, see the new bank more favorably.
+ Chairman Bachus. And pull that mike up, if you would.
+ Ms. Finucane. I'm sorry.
+ So our customers see our bank more favorably since we
+announced the merger and since they've started to interact with
+us as Bank of America.
+ We have increased net new checkings by more than 100,000,
+new checking accounts; same on savings accounts. So I think
+both the economics and the syndicated research would indicate
+that that was favorable.
+ Specifically, why do they see it more favorably? I think
+because there is a national network of ATMs and branches that
+they can go to across the country at no surcharge. We have free
+checking, free online bill pay, a better suite of products in
+terms of mortgages, and frankly we can put more money into the
+communities in which we work and live.
+ Chairman Bachus. Those are new benefits. And you did
+mention putting money into the community, the $1 million to
+Children's Hospital and others, philanthropic. Has that
+increased, your philanthropic giving?
+ Ms. Finucane. Yes. We will increase our philanthropic
+giving. We just made a commitment for the next ten years that
+we will put $1.5 billion into charitable giving.
+ So on a combined basis, what we're talking about is, the
+charitable giving Bank of America did, the charitable giving
+that Fleet did, combined, will over time be 40 percent improved
+on that combined basis; and immediately we just saw about a 10
+percent improvement in the last year.
+ Chairman Bachus. I see.
+ What new benefits have former Fleet Boston employees been
+provided as a result of joining Bank of America, those that
+have retained their jobs?
+ Ms. Finucane. First of all, they have greater job
+opportunities, stronger training programs.
+ But just to give you two ideas of two specifics, we have a
+home ownership program for our associates that allows--it's
+basically a forgiven-loan program. We give $5,000 to an
+employee toward the purchase of their home, and if they stay
+with the company for five years, we forgive that loan entirely.
+During the course of that five years, they're just paying on
+the interest, anyway. We also have some fee waivers that go
+with that. Tree hundred and nineteen of our former Fleet
+employees have taken advantage of that just since May of this
+year.
+ In 2005, we will introduce to the Bank of America program,
+to our Fleet associates, now Bank of America associates, a
+child-care program for lower-paid employees. Individuals that
+make $34,000 or less or have a household income of $60,000 or
+less will get $175 per child per month credit toward child
+care.
+ Chairman Bachus. Okay. You know, you're talking about a
+large financial services corporation like Bank of America. How
+are you working to uphold the CRA requirements to deliver
+products and services to the LMI communities on the local
+level?
+ Ms. Finucane. Well, thank you for asking the question,
+Chairman Bachus, because I know this is sort of the gist of
+many of the comments made by the community groups.
+ First of all, I think we appreciate the fact that Bank of
+America is new to the region; and to Congressman Frank's point
+earlier, sometimes, if it's unfamiliar, organizations can cause
+some trepidation.
+ I'd point again to the fact that both banks previous to
+this merger had outstanding CRA ratings. I would point out that
+both banks previous to this merger made commitments and then
+exceeded them in terms of the total goals.
+ I would say that--and the community groups are aware of
+this--we have taken $750 billion. We've broken that out in
+terms of the Northeast. For instance, Massachusetts knows that
+the number is $8.4 billion for the next three years. We've
+broken it by category. We've talked to many community groups.
+ I really think the gist of the problem that they see is
+they would like a lot of--we will report out on every item that
+they would like to know at the conclusion of a year. First of
+all, we will report out, not only by the state, but by
+metropolitan statistical analysis by each of the categories. It
+will include the LMI information, minority information to the
+degree it's disclosable.
+ You also have HUMDA data, you have our CRA filings each
+year, and you have our filings with the SBA. That in total is
+very specific, but it isn't--so we set the goals, and the
+reporting happens at the conclusion of the year. At the
+conclusion of the year, if there are any problems, we get
+together with our community groups and work to solve them.
+ Chairman Bachus. Thank you.
+ And I think you've targeted $100 billion for the Northeast?
+ Ms. Finucane. $100 billion for the Northeast over a ten-
+year period, but that's such a large number. We're trying to
+deal with it now in three-year increments, because I think it's
+much more tangible; and for the State of Massachusetts, it will
+be $8.4 billion, which is a 24 percent lift over what Fleet
+did.
+ Chairman Bachus. What is that about the market president
+network working with--what was that? I had read that.
+ Ms. Finucane. We have market presidents in each of our
+states, and in fact, using Massachusetts again as an example,
+we have a Massachusetts state president, and then we have
+regional presidents in Springfield, Worcester, Boston and Cape
+Cod. Each of those works with our people in CRA and in
+community development to look over the goals and to make sure
+they're met on a business level.
+ It's more than just commitment. You have to make these
+goals with the businesses. You have to reach out to the retail
+group and the middle market group and the real estate loans to
+make sure each of these happen, and they oversee that process
+on a local basis.
+ Chairman Bachus. Are you making strong local community
+alliances?
+ Ms. Finucane. Yes. As I've said, we've met with more than
+100 community groups.
+ Chairman Bachus. Thank you.
+ Mr. Lynch?
+ Mr. Lynch. Thank you, Mr. Chairman. Anne and Joe, I want to
+thank you both for participating in this hearing. I just have
+one brief question for each of you.
+ Anne, I know you've gone over generally some of the
+employment numbers, but could you take me through that again?
+Just where are we now with employment? It seems to be, you take
+one step forward, one back, but I know that's going to
+fluctuate for a little bit.
+ And more importantly, what are our projections for, say,
+the next two years going forward with employment?
+ Ms. Finucane. Thank you, Congressman Lynch.
+ We, premerger, announced--by the way, I use this word
+``FTE,'' full-time equivalent. That sort of eliminates the
+issue of part-time/full-time. About 80 percent of our employees
+are full-time, 20 percent part-time. Full-time equivalent
+means, if there were two part-time employees, they are one
+full-time equivalent.
+ So we had 17,900 full-time equivalents, premerger.
+ The impact of the layoff in New England was 2,900 full-time
+equivalents. We have already hired back or have announced the
+hiring back of 1,100 of those, so that gets us down to, we
+still have a gap of 1,800. But we've done 1,100 in four months;
+I think it's reasonable to think we can do the next 1,800 in
+two years.
+ The way we've done it is, we will look at many things, but
+two primary ways we've gotten back just the 1,100 is by moving
+the wealth and investment management group to Boston. That is
+one of the four major divisions of the company. It has six
+business units that report up to it, but it's one of the big
+divisions of the company. There are four big divisions.
+ We've headquartered that in Boston, so we can expect that
+we will continue to grow the population of an employee base
+there, which are very well-paying jobs. We put 700 people,
+actually 700 full-time equivalents, 900 people that we will
+hire in Rhode Island and southeastern Massachusetts in a center
+that we've put down there, a processing call center in Rhode
+Island. So I think it's the combination of those kinds of
+initiatives: growing business and then bringing business here.
+ Mr. Lynch. Just one follow-up.
+ I know that Maureen Flynn had mentioned in her testimony
+that we had one CRA specialist from Bank of America to handle
+both Massachusetts and Rhode Island.
+ Ms. Finucane. Right.
+ Mr. Lynch. Is there any chance that we might be able to get
+another person hired to take care of Massachusetts, one person
+handling Rhode Island?
+ Ms. Finucane. Well, she's talking about a relationship
+manager. We actually have about ten people that handle the
+territory in the areas of tax credit or lending or mortgage
+origination. So she was talking about a relationship manager.
+ I think what's reasonable is that we look at those ten
+people and see if there's a better distribution in terms of
+relationships.
+ There was also an issue, I know, that Florence raised with
+lenders in Boston for the SoftSecond program. We agree with
+that, and we're in the midst of hiring.
+ Mr. Lynch. Terrific. Thank you very much.
+ Joseph, if I could ask you, could you elaborate a little
+bit on the plans of Sovereign Bank post-merger to meet or
+expand its CRA commitments in struggling communities? I've got
+a few of those. And also if there are any job-enhancement
+possibilities specifically for people living in those
+communities.
+ Mr. Campanelli. Yes; thank you, Congressman.
+ Many of the discussions we had in our community advisory
+group is how we can do a better job. One of the things that
+came out of those discussions is a need for us to better
+deliver our bank products to all of our communities.
+ The catalyst behind our reorganization was to put senior
+executives in those communities that can make decisions and are
+held accountable for the entire bank product distribution,
+whether it's CRA, consumer, small business, or general
+corporate banking.
+ That has really allowed us to find opportunities, such as
+Roxbury Technology, where they had a struggling company; had a
+great opportunity to provide products to Staples. We partnered
+with Staples, provided a working-capital line. Ten new jobs are
+added in Roxbury, and we believe that's only the beginning.
+It's a model that we're looking to expand throughout all our
+footprint.
+ We're so supportive of it, we've actually moved our entire
+purchasing relationship from a current provider to Staples,
+because we feel Staples gets it. They want to look at ways you
+can do a better job of creating jobs in the city tied to
+affordable housing.
+ It really is an integrated approach on how we work with the
+community groups that are out there, the development agencies,
+some of the state and local programs, and with our own team
+members in those markets, making a difference.
+ Mr. Lynch. Thank you, Joe; thank you, Anne.
+ Mr. Chairman, I thank the Committee for your courtesy to
+me. I do know that Senator Nuciforo and also Representative
+Quinn are going to testify on the next panel. Unfortunately I
+have to be somewhere else, but I will follow up on both of
+those legislators after the hearing, after their testimony; so
+we'll touch base then. Again, thank you, Mr. Chairman.
+ Chairman Bachus. Thank you.
+ At this time, I recognize the Ranking Member.
+ Mr. Frank?
+ Mr. Frank. Thank you, Mr. Chairman.
+ I want to say, as I said before, there has been unusually
+good testimony from all of the witnesses, and I appreciate it.
+ I want to comment particularly on the choice of one
+witness. There was one report that somehow the fact that Ms.
+Finucane was testifying instead of Mr. Lewis was a problem for
+the Committee. Quite the opposite is the case. It would be very
+odd if we were simultaneously to complain that there was not
+enough local input, and an objection when we got it.
+ [Laughter.]
+ Mr. Frank. The fact is that Ms. Finucane has been, I think,
+a very important player in understanding. And she's in the
+middle; she's conveying messages both ways. There was no
+problem at all, it seems to me; in fact, I think it is
+preferable.
+ We've had a chance to talk to Mr.Lewis; people seem to have
+forgotten, those who commented on that, that Mr.Lewis made a
+special trip up here in September when we were particularly
+distressed about employment. He visited Representative Quinn,
+Senator Nuciforo, Representative Capuano, myself and
+representatives from the offices of my colleagues; so we regard
+this as an entirely legitimate and useful approach.
+ Let me say, here is the situation with Bank of America. We
+have a major national economic entity entering this region.
+They come in, and they buy up what had been a major regional
+entity.
+ That's a fact that inevitably gets people nervous. It
+doesn't mean anybody's a bad guy or a bad woman; it's just
+that's the kind of thing that happens.
+ It also, though, is very important. Clearly, we're going to
+have to learn to live with each other. I think we ought to be
+ready to do that. People have said, well, you know, if it was
+up to us, Bank of America wouldn't be coming in here.
+ Well, if it was up to some people at the Bank of America,
+maybe I wouldn't be in office.
+ [Laughter.]
+ Mr. Frank. I mean, we didn't pick each other. But in the
+interest of the people we serve, some of us in the electoral
+process, and others through the economic process, we're going
+to work together. There will be some bumps and grinds, but I
+think we are moving forward, let me say; and I think it's
+important to both give credit where it's due, but then complain
+where you haven't been satisfied.
+ With regard to housing, Bank of America has been extremely
+responsive. We've already noted that with the Massachusetts
+Housing Partnership cashing out, there was a state obligation
+that they find some money, but they turned that into a cash
+grant at our request, and that was helpful.
+ Same thing with the affordable housing program, they took
+strides to do that; working with the Mass.Affordable Housing
+Alliance. Ms. Finucane just acknowledged that they need to do
+better in Boston, and we look forward to that.
+ On the other hand, there have been some unsatisfactory
+conversations elsewhere, and I must say--maybe it's a cultural
+difference--why there is resistance to appointing a state
+advisory board, I do not understand.
+ I must tell you, give you a little free political
+consulting advice. If I could make some people who were unhappy
+happy by appointing an advisory board, you'd have that board
+appointed in about a minute and a half. I never heard of
+anybody that ever died from having an advisory board.
+ And the fact is that I would hope people would understand,
+you're talking about constructive people. These are not barn
+burners; these are people who are thoughtful, who understand
+economics, and I think it is important to note that in all the
+differences, neither side has accused the other, it seems to
+me, of being economically unrealistic. So I would hope we could
+work within that framework.
+ I then want to turn to the jobs question. Now, that's been
+important for both banks, and that was one of the issues that
+we talked about.
+ Housing, I think everything is good. In some of the other
+areas, we still have some concerns and some further work to be
+done; and I think the request for specificity, I would say to
+the Bank of America, is a perfectly reasonable one.
+ But let me just touch on race. This is one of the
+advantages of Ms. Finucane. Anybody who has lived in Boston for
+the last twenty years or more knows we've had this terrible
+situation with regard to race. That is significantly improving,
+and a lot of us have worked to improve it.
+ But there's a residual tension, and anybody who approaches
+the race situation in Boston shouldn't be surprised when there
+is a show-me attitude, a demand for specificity, because it's
+part of the heritage that we're all working to overcome.
+ Then the other area is employment. I was disappointed, and
+said so in September, when I thought that job losses were
+coming that had not been anticipated. I agree that since
+September, with the three announcements, first moving wealth
+management here, then opening the call center in Rhode Island,
+which is near my district, in southeastern Massachusetts, as is
+my colleague Representative Quinn from there. The city of Fall
+River, for example, is in the Providence SMSA. So when you put
+good jobs like that in East Providence right next to
+Massachusetts, you're doing a good thing for southeastern Mass.
+as well. I appreciate that.
+ I think we also ought to be clear, there was no legal
+requirement that Bank of America pledge to keep its employment
+commitment. That was something that they did and we were
+pleased to see. Some of us would have been more critical. I
+cannot say that the landlords here in this institution, the
+Federal Reserve, would have paid a lot of attention to us. I
+mean, if we had been disappointed in the job thing, I must tell
+you that it is not my approach to say, well, these guys don't
+like it; that's the end of that merger. But we do have that. It
+is important.
+ So I appreciate the steps that have been taken to begin to
+move jobs back, and I guess I want to say, at this point I am
+confident that Bank of America means what it says. Obviously--
+and I think it's a year from now we're talking about, January
+of 2006, is that the date that we said by which there would be
+the equivalency?
+ Ms. Finucane. Well, 2006 in----
+ Mr. Frank. Not necessarily January? Sometime in 2006?
+ Ms. Finucane. It's reasonable to expect that we would,
+before the middle of 2006----
+ Mr. Frank. Obviously, that's going to be critical to the
+relationship. I must say, if we can get back then, then there
+will be some--I think that will be, as I said, very helpful to
+the relationship.
+ We did have, with regard to Sovereign, an inevitable job
+loss because of Seacoast. With Sovereign, there was much more
+overlap. I guess one of the reasons we were concerned, we were
+surprised to some extent, there was no Bank of America/Fleet
+overlap; Sovereign and Seacoast had a considerable overlap. But
+I do appreciate Sovereign's reaching out on the Community
+Investment Act; and as I said, they have been working with us
+in housing.
+ Let me just close with one other kind of general comment,
+that I hope my friends in the banking community will listen to.
+I'm not going to talk about your bonuses this time; I did that
+last week in New York.
+ But the question we have is this: Clearly, the merger,
+Sovereign buying up Seacoast, Bank of America buying up Fleet,
+those are in the interests of the overall economic efficiency
+of the country; and I believe that they are.
+ Productivity goes up. Technology and globalization, all
+those things, argue for these kinds of mergers. But we have
+this problem in this country. Alan Greenspan said in April of
+2004 that the good news was that productivity was going up, but
+he noted--this is to the Joint Economic Committee--that all of
+the gains from the increased productivity were inuring to the
+owners of capital, and none were going to compensation paid in
+the form of wages. I don't think that is sustainable in terms
+of equity, and I don't think it's sustainable economically.
+ We're now looking at retail job figures for this holiday
+season, and what do we see? The luxury goods are going off the
+charts in the upper direction, and the bottom is falling out of
+some of the low-end.
+ Now, I must say, I tell my colleagues, the fact that Wal-
+Mart isn't doing well doesn't cause me any great heartburn, for
+reasons of their antisocial approach in so many ways. But
+economically, here's the problem: The inequality in America is,
+I think, beginning to have not just negative social effects,
+but negative macroeconomic effects, because you cannot sustain
+an economy where a large number of people don't have that kind
+of money to do things.
+ So that's the context in which corporate responsibility has
+to be explained.
+ Yes, I understand that this merger, that this purchase by
+Bank of America of Fleet, the purchase of Seacoast by
+Sovereign, these are in the overall macroeconomic interests of
+the country; but we cannot continue to ignore the distributive
+effects, because that's neither socially acceptable nor, I
+think, economically useful.
+ So that's why we say to Bank of America, please try to
+maintain this economic situation, the job situation, because
+it's not simply what it does to the bottom line or to the gross
+domestic product that counts; we need to have some concern
+about equity.
+ As I said, I just hope that it will be understood in this
+context. Nobody up here disagrees with the important role that
+banks play in our free market system, but we hope that we would
+get a significant understanding that increasing productivity
+and enhancing the profitability of stockholders by itself is
+not enough; and if that's all that happens, you're going to see
+a movement in the country towards a kind of economic disparity
+that, as I said, I disagree with in terms of values, but I
+think has some economic negatives.
+ Mr. Chairman, I've overused my time. I appreciate the
+indulgence.
+ Chairman Bachus. Thank you. I would like to confirm that
+when you're disappointed, you do say so. I think that's partly
+a Massachusetts thing.
+ [Laughter.]
+ Chairman Bachus. Mr. Capuano?
+ Mr. Capuano. Thank you, Mr. Chairman. I wasn't disappointed
+in the baseball scores this year, so that's about it.
+ Mr. Chairman, I have a few questions. Before I do, I want
+to echo what Barney said about Ms. Finucane. She has a great
+reputation. We're looking forward to her running this bank.
+ And I'm hoping that things smooth out because of your
+knowledge of the region and the different culture that we may
+or may not have. I have no proof whether we do, but I know our
+culture, you know our culture; if it is different, I'm hoping
+that they listen to you.
+ I'd also like to thank Mr. Campanelli. Again, as I said
+earlier, I think Sovereign is one of the banks that has
+understood that. They're not a local bank, and I think that his
+predecessor, Mr. Hamill, and Mr. Campanelli both have brought a
+knowledge of the region that their bank has heard. As I said
+earlier, I think with the Bank of America, the test is still
+out.
+ I just want to say for myself, the things I've been most
+concerned with this merger are the lack of details that people
+can look at and say, okay, this is what we can expect. If we
+don't like it, fine; I can see a reason people will disagree,
+and some people will never be satisfied. I may even be one of
+them. But without detail, there is nothing but questions and
+distrust; and for me, that's been the biggest issue.
+ Part of that lack of detail has also been the suspect
+timing of some of the announcements that may or may not have
+happened otherwise. The fact that it just so happens you
+announced 300 jobs here in Massachusetts last week when we're
+having a hearing, it's nice, but it does raise questions. And I
+wonder, do we need to have a hearing every week to get good
+news?
+ And the fact that we just get a three-page strategic
+business plan this week, again, it's a nice plan, it's a good
+beginning; but do I have to have a hearing next week to get the
+details?
+ So for me, it's not so much that I'm capable--I think
+anyone here is capable of questioning the substance or the
+motivation, as much as we're not sure; and it just seems to
+have taken a long time to make progress on that issue.
+ And I guess most notably, and I know that you've heard my
+questions in the past, when it comes to the employees, I
+understand that when mergers happen--I think we all do--in the
+real world, that people lose their jobs. We know that. We
+understand that. We understand the result of it.
+ But what I'd like to ask now, as I've asked in the past,
+without getting down to every single individual job, can you
+tell us right now, are the bulk, the major, the 99 percent of
+the merger-related layoffs, are they done, or do we have more
+to come?
+ Ms. Finucane. They're done.
+ Mr. Capuano. Thank you. I think that's important for the
+employees to know, especially in this season, for them now to
+go to Christmas. Understanding that individuals can continue to
+be laid off, and that five people, ten people are not the bulk,
+I really appreciate that statement; and I think had it been
+made earlier by others, that it would be done when we had X
+number, I think that would have made a lot of employees in the
+region a lot more comfortable.
+ Relative to the plan that was released last week, I saw
+last Sunday, again, it is a fine first step. The numbers I'm
+not questioning; the intent I'm not questioning. But are there
+plans by the bank to work out more detail, or is that it?
+ Ms. Finucane. There are more--should I answer that now?
+ Mr. Capuano. Please.
+ Ms. Finucane. Yes.
+ First of all, in order to meet the goals that we've set,
+you've got to meet with community groups, and you've got to
+work through with them. The production itself, often what
+happens--in the case of MAHA, they helped us with true
+production on the SoftSecond program. In some other community
+development groups, they can help us with true production.
+ In many cases, we have to deliver it through our banking
+centers, our real estate, ourselves; and we're looking for
+partnership in terms of identifying those opportunities. That
+goes on, not just when there's a hearing; it goes on every day,
+in every part of our country, including throughout
+Massachusetts.
+ I think the real issue is--and we will report on that in as
+thorough a manner as I think anyone could want at the
+conclusion of a year, and that's been the Bank of America
+practice for the last few years. It's worked very well in terms
+of they exceeded their goals; they got an outstanding CRA
+rating. We will do the same here, so that I think the
+specificity will all be there. It isn't prospective; it is
+reported on an annualized basis.
+ But that doesn't mean that we're not meeting with every
+community group that we need to meet with in order to create
+that production.
+ Mr. Capuano. But does that mean that the three-page
+document that we have, will I see a ten-page document or a 20-
+page document in the next month, six months, some period or do
+I have to wait until we're now working backwards to see whether
+you met those numbers?
+ For instance, the questions I asked the last panel, who's
+going to get the money? Where is it going to go? What's your
+definition of affordable housing? How much is going to be
+leased? How much is going to owned?
+ All those questions that are really too detailed to deal
+with now, do we expect to see that, or are we going to have to
+wait for various reports?
+ And I understand all the reports that banks have to do, and
+that's why they're there. Do we have to wait for all those
+reports to come in, and look retrospectively to say, oh, you
+met them? Or can all the organizations, and more importantly,
+the constituents I represent, who are looking for these things,
+will they be able to say, okay, we know what the bank plans on
+doing this. Are we going to work with the bank to help them
+reach their goals?
+ Ms. Finucane. I think it will be clear how to work with us.
+I think that what you're hearing from--and let me use MACDC as
+an example--the specificity in which they would like us to lay
+out by category, by microcategory, prospectively we will not be
+doing.
+ What we will be doing, though, is, remember that--and I
+don't mean to sound like a broken record here. Both companies
+had outstanding CRA ratings. Both companies report out by
+category, by LMI, by minority, by region, by MSA, on an
+annualized basis; and then we of course report with HUMDA and
+SBA, which we're the number one SBA lender.
+ We're also at 27 percent, I think it is, of LMI mortgage
+lending in Massachusetts. This stuff is going on constantly,
+and we will be working with the community groups to make sure
+that we can meet those goals.
+ Our job is to maintain stronger relationships with even the
+people that were here on this panel on a go-forward basis in
+order to create production.
+ Mr. Capuano. I appreciate that.
+ Mr. Campanelli, my last question. I presume you sat in on
+some of the negotiations relative to Sovereign, both the
+original ones and the renegotiations?
+ Mr. Campanelli. The vast majority.
+ Mr. Capuano. Did those negotiations hurt you either
+financially or socially or competitiveness?
+ Mr. Campanelli. No; and it depends on how you characterize
+negotiations. We viewed them more as conversations, looking at
+where we can do better, what was available within the
+community, and how best to accomplish the objective and the
+goal.
+ Mr. Capuano. Thank you very much.
+ Chairman Bachus. Mr. Watt?
+ Mr. Watt. Thank you, Mr. Chairman.
+ I was tempted to pick up on Mr. Capuano's statement and
+suggest that we might have a hearing in Charlotte if we can get
+three or four hundred jobs created there; but I won't go there.
+ [Laughter.]
+ And Barbara says she wants one in California.
+ Mr. Meeks. You can't bypass New York.
+ Mr. Watt. Well, you already said New York is the center of
+the universe for banking, so it's not a big thing.
+ Mr. Campanelli, I'm going to ignore you for a little bit,
+but it's not because I don't like you.
+ Mr. Campanelli. That's quite all right.
+ [Laughter.]
+ Mr. Watt. It's because you don't have any operations in my
+area, so I'm going to Ms. Finucane here.
+ Process: The testimony of the witnesses on the first panel,
+you've made some written commitments. There are some areas
+where you have not made written commitments.
+ First of all, where there is no history of an apparent
+transformative effect, as I have the benefit of having in my
+community, do you view it as something that's important to have
+written commitments on other things, and will there be ongoing
+efforts to get to written agreements, commitments, or is it
+just inconsistent with your philosophy, you'll wait until the
+end of the year, you'll report, you'll exceed maybe, probably,
+all of what you might have agreed to do in a written commitment
+if you had agreed to do it in a written commitment; but is
+there a philosophical objection to getting to written
+agreements of some kind?
+ Ms. Finucane. First, let me address the issue of the panel.
+ We're familiar with the panel and have worked with each of
+the members of the panel in the past, and we will continue to
+work with the members of the panel. We respect their point of
+view. We respect their issues. We think that we can meet the
+need and continue a relationship without a written agreement.
+ In the past Fleet has had written agreements. I will tell
+you honestly, in some cases, while we exceeded our overall goal
+of, in our case it was $14.6 billion, in some cases there was a
+written agreement of certain production in a certain geography
+in a certain category that probably over a two-year period we
+should have adjusted, but one gets locked into these written
+agreements, and there's very little flexibility.
+ Secondly, Bank of America has had a very good track record,
+without the written agreements, of delivering on everything
+they had laid out. This isn't just rhetoric; it's a matter of
+the record. And it isn't just our record; it's record by
+regulatory bodies and by law.
+ So I think that for all of those reasons, we feel pretty
+comfortable.
+ I appreciate the fact that Bank of America is new to the
+region, but many of us in this room and that are working with
+the community groups are not new. I think if we were good for
+our word before, we are good for our word now. Also, our record
+shows it.
+ Mr. Watt. I'm probably the last person on this panel that
+ought to be trying to pin you down on this, but I'd have to say
+you did a good dance for me there.
+ [Laughter.]
+ Mr. Watt. Do I take that to mean that there will not be
+additional written commitments? I mean, it sounds like you've
+made a commitment on the second mortgage fund. You've made
+public pronouncements on the lending front.
+ Ms. Finucane. Right.
+ Mr. Watt. For CRA purposes, where apparently there has not
+been a written commitment of any kind, small business lending,
+employment composition, racial composition, procurement, a
+critically important area; do I understand the bottom line to
+be, there's not going to be a commitment? It's a ``Trust me''?
+ Ms. Finucane. No, it's not a ``Trust me.''
+ First of all, we have made some commitments. The Bank of
+America has made a commitment to, over the next few years--and
+I'll give you a report card on this year--of reaching a 15
+percent goal of minority procurement.
+ This year we were--or 2003, which was the last full year we
+could report on, it's 9 percent. That's 620----
+ Mr. Watt. That's a global commitment?
+ Ms. Finucane. Nationally. But I'll get to----
+ Mr. Watt. That's a national commitment, and what I'm
+hearing from the local folks here is, we can't do this
+globally; we've got to do it community by community. Is there a
+problem with that?
+ Ms. Finucane. Well, no; but if I could, in the Northeast
+alone, just by way of example, Fleet had, in 2003, spent $50
+million on procurement with minority vendors. In the Northeast,
+Bank of America did $100 million.
+ So I think it's reasonable to expect that we will do better
+as a combined bank than we did as Fleet alone, and that is in
+the Northeast itself.
+ In terms of statistical numbers, which I hesitate to refer
+to--and I do have them on a national basis; I don't have them
+for Massachusetts, although we have had conversations with Juan
+at the local NAACP on numerous occasions--our numbers, and this
+is the September filing, our total work force was 68 percent
+women, 42 percent people of color. And to use that, sort of
+another outlook at that, for the vice-president level and
+above, 46 percent were women, and 22 percent were minority.
+ So from a global perspective, those numbers are very good.
+I don't have them for Massachusetts in any kind of recent form.
+ I need to state that we deeply appreciate the need for
+opportunity for all our employees, and we seek to have a
+diverse work force that reflects the communities in which we
+work and live. That's good for business.
+ We have a diversity council; we have a hiring practice that
+seeks a diverse candidate base for almost any job that we have.
+Fifty percent of our people that we've hired in our branches in
+the last two years, 50 percent of them are bilingual. I cannot
+tell you what an effort we try to make in terms of diversity,
+not only in terms of our employment base, but reaching out to
+the community.
+ Mr. Watt. I think the concern is, you're talking about
+performance, and other people are asking you about commitments;
+and those people are people who don't have the history,
+necessarily of--I mean, I hope that you will consider, at least
+in the procurement area, and you said there's somewhere written
+down, a 15 percent commitment.
+ Ms. Finucane. There is a commitment to 15 percent.
+ Mr. Watt. In this area, or globally?
+ Ms. Finucane. Globally. But I want to give by example, just
+to use the Northeast, which was in the last few weeks the most
+narrow we could break it down, Bank of America spent
+$100million on the diverse supplier list, where Fleet had done
+$50 million.
+ So frankly, it's clearly an improvement and one that I
+think will bode well for the future. We're going to do it for
+Mass. Will we do it for each state? I don't think so. Will we
+do it by region? We will try to do that, to give some
+specificity.
+ In terms of agreement, just a final thing. Sometimes this
+is an issue of language. Each of the people that we deal with
+in terms of community groups, in essence, there's a form of an
+agreement with many of these groups because the community
+groups help us deliver on our promises. But it's a focus on
+production rather than a prospective ideology.
+ Mr. Watt. Thank you.
+ Chairman Bachus. Mr. Meeks?
+ Mr. Meeks. Thank you, Mr. Chairman. I'll be brief, and I
+think I'm learning from some of the Massachusetts people here.
+All politics is local, and I don't know whether you're equipped
+to answer these questions. Just a couple questions real quick
+now, but they're going to pertain to New York.
+ Ms. Finucane. Okay.
+ Mr. Meeks. I understand that Bank of America is in the
+process of building a large tower in Manhattan very shortly.
+ Ms. Finucane. Yes.
+ Mr. Meeks. So my question is, do you know whether or not
+Bank of America has, or will have, a minority business
+component to go along with the construction of that building,
+where there will be minorities that will be involved on the
+construction phase of the building?
+ Chairman Bachus. I thought he was going to ask for two more
+stories on the building.
+ [Laughter.]
+ Ms. Finucane. Well, we are not responsible for the actual
+construction of the building. That is--I forget the name of the
+firm. I'm sorry; I don't recall the national developer's name,
+but we are not handling the construction of the building.
+ Mr. Meeks. But they're contracted by you? It's been my
+experience in New York, any time we've had a major corporation,
+for example, with American Express, after 9/11 they were
+redoing their building, and there was another contractor, but
+they told their contractor they wanted to make sure that there
+was a minority business component of the construction of the
+building. Because again, it reflects upon them.
+ Ms. Finucane. Right.
+ Mr. Meeks. So I'm wondering if there's a similar type of at
+least a direction in which the Bank of America is moving with
+reference to this construction of this large tower.
+ Ms. Finucane. Well, we certainly support opportunity, and
+given that we're neither doing the construction nor are we the
+developer of it, we're a few sort of businesses removed; but I
+will look into that. I'm sorry; I just can't----
+ Mr. Meeks. I understand. Please look into it, because I can
+tell you that a number of us, we'll be reaching out to you, but
+we'll also be reaching out to the contractor.
+ Secondly, the local concern that I have, Fleet had a large
+presence in my district, and was doing a number of things
+there, had a number of individuals that were employed there. I
+think totally, though, Bank of America at the time only had
+about 40 to 43 people that were employed in the district.
+ I was wondering whether or not, with the merger, whether or
+not Fleet will be looking to do additional business in a
+district like mine--I'm in southeastern Queens, which is
+basically really kind of a middle-class community. So I was
+wondering whether or not there's any plans to expand in
+communities like mine since this merger, but particularly since
+Fleet had such a large presence within the district.
+ Ms. Finucane. Well, Bank of America has not only the
+capacity but the desire to build out in New York City in a more
+aggressive way than Fleet would have been able to do. So we
+have already opened six new banking centers in the Manhattan
+area; we're looking at other opportunities throughout New York
+City.
+ I can't speak with specificity about your district, because
+I don't know whether we have a banking center planned; but I
+can tell you that we are looking to expand our presence in New
+York. Unlike New England, we do not have a number-one presence
+in terms of market share in New York, and we're eager to get
+there.
+ So I think that we would be most anxious to continue a
+dialogue with you.
+ I know that you can expect that in terms of employment
+levels, philanthropy and community development, those will all
+improve in the next months and years to come.
+ Mr. Meeks. Very good. I definitely would like to have that
+discussion, because unfortunately what has happened--and Fleet
+was the one that was really kind of taking up some of the
+slack--there was not the kind of presence given the economic
+impact that the community had, particularly on a commercial
+level with commercial development in the community. So I would
+love to be able to follow up with you to have a conversation
+with regards particularly to southeastern Massachusetts and
+Queens.
+ Ms. Finucane. Thank you.
+ And Congressman, I would like to address a comment you made
+earlier in your questioning of the community groups about
+financial literacy. Just as an example, we've put more than $6
+million into the issue of financial literacy. I think that most
+financial institutions, I'm sure Sovereign agrees, all of us
+feel that we need to do more in the area of financial literacy.
+ Mr. Meeks. Thank you for that, and I'll be looking for you
+to come and help out some of our schools in southeastern
+Queens. Thank you very much.
+ Chairman Bachus. Ms. Lee?
+ Ms. Lee. Thank you very much. Thank you, Ms. Finucane, for
+your testimony.
+ I'm glad to hear of the $100 billion commitment here as it
+relates to CRA. I'm trying to reconcile what I heard from Mr.
+Cofield in terms of, it seems like there's some disconnect
+here. He indicated that he only heard and had some refreshing
+discussion very recently, last week, with regard to what is
+taking place and what the plans and commitments are.
+ So again, going back to associating itself to Mr. Capuano's
+remarks, what is it going to take? The NAACP is a very
+important organization, and if they have only had recent
+discussions, what can we do to make sure that those discussions
+are real and continue? That's the first part of my question.
+ The second is, you mentioned that Bank of America is the
+number-one mortgage lending institution to minorities. Could
+you verify that for California for me, please? Because from
+what I remember, the last report that I saw was very dismal in
+terms of B of A and its lending to minorities; but I may be
+wrong. I'd like to verify that.
+ And thirdly, with regard to minority and women-owned
+businesses--I was a former small business owner; I was in
+business eleven years prior to coming to Congress--and just
+listening to Mel Watt and talking about written agreements, I
+had to have written agreements for everything I did;
+everything. There was no way I could function without a written
+agreement. Not just contractual, but every move I made had to
+have a written agreement. But I guess the rules are a little
+different for the small businesses.
+ But I'm looking at the breakdown that you provided
+subsequent to Congressman Frank's request with regard to
+minority and women owned businesses, and I want to ask you, is
+this a national chart that you provided? You had 511 African-
+American suppliers, 59 Asian-Indian----
+ Ms. Finucane. Yes.
+ Ms. Lee. That's national.
+ Ms. Finucane. Yes.
+ Ms. Lee. And 519 Hispanic. Last year is 9 percent?
+ Ms. Finucane. 2003.
+ Ms. Lee. 2003 is 9 percent, and you're hoping to get to 15
+percent next year?
+ Ms. Finucane. Actually, no; I think it's in 2009.
+ Actually, in 2004, my guess is that our number, our
+percentage, will look lower, because the denominator will be
+higher, because we'll have the combination of Fleet and Bank of
+America. So the actual dollars spent with minority suppliers
+will go up; but because the denominator is bigger, the
+percentage will look slightly lower.
+ Ms. Lee. It just looks like a very small number of
+suppliers that you have nationwide, so I'll be very interested
+to see the dollar amount. Maybe the dollar amount doesn't
+support an additional pool of minorities.
+ Ms. Finucane. It is 625 for 2003.
+ Ms. Lee. 625----
+ Ms. Finucane. Million.
+ Ms. Lee.----million? Out of what, in terms of total
+suppliers.
+ Ms. Finucane. Out of the base, I'm sorry; I don't know. We
+could provide that to you.
+ Ms. Lee. Could you provide that for us, please?
+ Ms. Finucane. I can provide to you in terms of where we
+stood in terms of mortgage lending in California. In
+California, we're number three.
+ Ms. Lee. You're number three in California?
+ Ms. Finucane. Yes.
+ Ms. Lee. Do you have the breakdown in terms of the
+percentages.
+ Ms. Finucane. I don't here today.
+ Ms. Lee. Would you get that?
+ Ms. Finucane. Sure.
+ Ms. Lee. Because I just want to verify this, because the
+general--and again, it's based on the report we saw several,
+about a year or two ago, the numbers had seemed to be, for
+African-Americans 2 to 3 percent.
+ Ms. Finucane. Okay; we'll look into that.
+ Ms. Lee. It was very low.
+ Ms. Finucane. I do want to speak to Mr. Cofield's remarks
+insomuch as I'm sorry you only found them productive in the
+last week or so, but we have had conversations for the past
+year through the local NAACP and then an association, a
+coalition that's associated with it. So the dialogue continues.
+ Ms. Lee. I think his point was, though, it was not a
+definitive dialogue; it was finally beginning to become a
+dialogue.
+ Ms. Finucane. Right. Well, I appreciate that.
+ Ms. Lee. Thank you very much.
+ Chairman Bachus. Thank you.
+ Mr. Tierney, it's your time to wrap up and summarize.
+ Mr. Tierney. Thank you. I feel a little bad for Mr.
+Campanelli here, but I don't think he feels too bad about it.
+ [Laughter.]
+ Chairman Bachus. I haven't heard him complain.
+ Mr. Tierney. I haven't heard him complain, either; and I'm
+not going to break the pattern here.
+ It's safe to say that the folks that Sovereign has working
+up in the northeastern part of the state certainly are doing a
+great job, and we appreciate that, both with the local and
+small business community and the community at large; so thank
+you on that.
+ Ms. Finucane, I just want to nail down some aspects. It
+looks to me, or sounds to me, as if the concern that Bank of
+America has about specificity is that there will be some
+resulting litigation, or if not litigation, confrontation about
+not having met specific exact details down there; that you feel
+you can meet general firm things, but geographically there
+might be a little difference in the way things result or things
+like that. Is that part of the hesitation?
+ Ms. Finucane. No. Really, the hesitation is that I would
+say we would like some flexibility, because what happens--I
+don't think it will be litigation, by the way. It's a matter
+of, you seek some flexibility so that as you see opportunity,
+you can take it. And I don't mean just----
+ Mr. Tierney. I hear you, but can't you--how is it that
+Citizens can do it and Sovereign can do it, and the Bank of
+America can't come up with some sort of a written agreement
+setting forth specific goals with some flexibility in it? I
+think you've got smart lawyers and negotiators.
+ Ms. Finucane. I think we have it. Our written agreement is
+that we will do $750 billion; $100 billion a year and $8.4
+billion in the next three years in Massachusetts----
+ Mr. Tierney. I think you know what I'm saying. It's not
+specific in terms of what the advocacy groups are looking for,
+nor even reasonably in that direction. Apparently Mr. Cofield
+felt that you didn't get to the national global figures until
+last week; so while you may have had a lot of conversations
+over the period of time, you're just getting to the global
+figures. There's some frustration that I sense on that, that
+you couldn't have gotten there sooner and down to a more
+specific level locally here at a quicker pace.
+ Ms. Finucane. I appreciate what you're saying, Congressman.
+We did provide these global numbers before. I think he was
+speaking about more specificity in terms of a relationship
+going forward, and an advisory role that he feels that the
+local NAACP could play. So I think he was speaking more
+specifically. The numbers have not been unclear.
+ Just to repeat, I'm not being--this isn't rhetoric. We have
+broken it by state, by category within the state, and the
+difference between what our previous commitment was and our
+current commitment, and what improvement that would be. I think
+we have a game plan for how we will get there.
+ What we haven't done is given, by category, a prospective
+by category, by geography, some of the categories that some of
+the community groups would like; and they're not all in
+agreement on what they would like.
+ Mr. Tierney. I understand. Is there any other aspect of
+your business that you don't look prospectively forward and set
+out some written goals with a certain degree of specificity?
+ Ms. Finucane. We have written out prospective goals with
+specificity. I think the disconnect is the kinds of commitments
+and the kinds of reporting they would like us to do. We want to
+report it at the end of the year----
+ Mr. Tierney. Well, that wouldn't be very prospective.
+ Ms. Finucane. But the prospective is that we've laid out
+the categories, the increase in the categories, and the
+fundamental ways that we will get there.
+ Mr. Tierney. And they want?
+ Ms. Finucane. They want greater specificity. They basically
+want--I think to be fair, using retrospectively what we've seen
+other banks do or that we've done ourselves, it's very
+cumbersome. If you're doing it--the amount of money we will
+spend in these categories far outweighs what any other bank in
+the region will spend in these categories.
+ Mr. Tierney. Have you seen the models that the witnesses
+have talked about in terms of what Sovereign has done in
+reaching an agreement with them?
+ Ms. Finucane. No.
+ Mr. Tierney. Maybe it would be instructive to take a look
+at that and see if there's some objection that Bank of America
+has that you couldn't get close to that model. It seems to me,
+if other banks can do it, then--and not having looked at it for
+Sovereign Bank, Bank of America objecting to something they're
+not even clear on what it is that they might accomplish and
+might get to some point of agreement with.
+ Ms. Finucane. I think we'd be happy to look at those. We
+certainly have in the past with Fleet, and so has Bank of
+America.
+ I just would repeat, it isn't as if we're talking about two
+banks that haven't done well at this.
+ Mr. Tierney. No; and please, I don't mean to interrupt.
+You've said that over and over again, and I think everyone in
+the room gets the point.
+ Ms. Finucane. I hope so.
+ Mr. Tierney. I hope so, too. But I don't know if Bank of
+America is getting the point----
+ Ms. Finucane. I think we are getting the point.
+ Mr. Tierney.----that it is quite possible to do a
+prospective agreement with more specificity than it has.
+ And now, to get back to the original point, is it attitude,
+or what is it that makes the bank so stubborn in saying it
+doesn't want to get to that point?
+ Ms. Finucane. It's not attitude. It's a matter of, in terms
+of good business--I think the thing is, in terms of the
+agreements, there are many organizations we will do very
+specific agreements with in order to produce the results that
+we need.
+ These are coalitions of community groups that want various
+steps to be taken, various iterations on the reporting. You
+spend a lot of time doing that and maybe less time doing the
+production, and when you produce much more than any other
+company can do, I think there's a value to that, too.
+ Mr. Tierney. Did you have those kinds of agreements with
+Fleet and these organizations?
+ Ms. Finucane. Yes.
+ Mr. Tierney. So it's not impossible to do it; you've done
+it before?
+ Ms. Finucane. Right.
+ Mr. Tierney. Can you explain for me the reasons, what went
+wrong with those agreements that would encourage you not to
+want to enter into them as Bank of America?
+ Ms. Finucane. I don't think it's a matter of what went
+wrong. This is a different business model.
+ Mr. Tierney. In what way?
+ Ms. Finucane. The different business model is that we will
+lay out our goals, we will----
+ Mr. Tierney. Without specificity?
+ Ms. Finucane. No, I think there is specificity. I think
+that we do have more specificity than you're appreciating here
+in this room.
+ Mr. Tierney. Do you have more specificity, in Bank of
+America's view, than you did when you had Fleet?
+ Ms. Finucane. No.
+ Mr. Tierney. And you say that your new business model
+prohibits you from getting the kind of specificity you had in
+the Fleet agreements.
+ Ms. Finucane. No, I don't think it's a matter of
+prohibiting. I think it's a matter of, we feel we can deliver
+on this. We think that in working with the community groups, we
+will meet and exceed our goals; and we will have a track record
+from both companies to have done that.
+ Mr. Tierney. Thank you.
+ Chairman Bachus. Thank you. I appreciate it, folks, your
+testimony.
+ Mr. Campanelli, is there anything you'd like to add?
+ Mr. Campanelli. No; I appreciate the opportunity to speak
+before the Committee, and it's really the results of all our
+team members that allows us to accomplish what we've done. We
+look forward to continue being a responsible corporate citizen.
+Thank you.
+ Chairman Bachus. Thank you. I appreciate both your
+testimonies. Very instructive.
+ Ms. Finucane. Thank you.
+ [Pause.]
+ Chairman Bachus. At this time we will reconvene with our
+third panel, which is made up of elected and state officials.
+This time, Mr. Frank is going to introduce the third panel.
+ Mr. Frank. Thank you, Mr. Chairman. I'll do it in the order
+that they're seated.
+ First is Representative John Quinn, who is someone I work
+very closely with, both on banking issues, and also he is in my
+district and is a great expert on fishing law. So John Quinn
+has been a great representative of the fishing industry, and
+I'm glad to have him here.
+ Next to him is Senator Andrea Nuciforo. People should know,
+in Massachusetts, the legislative committees are joint
+committees; and they are co-chairs of the Committee on Banks
+and Banking, is it still called, in Massachusetts. Senator
+Nuciforo represents western Massachusetts, and between them
+they have a very distinguished record, including the passage in
+Massachusetts of, I think, a very good predatory lending law
+that I hope we will take a look at. It's close to the law of
+South Carolina, and I think serves as a good national model.
+ Finally, Commissioner Steven Antonakes, who is a bank
+commissioner. We have a very strong commission in Massachusetts
+of bank commissioners who have been both fully appreciative of
+the importance of the banking industry and respectful of the
+rights of consumers. I understand how they go together, and
+Commissioner Antonakes has continued in that tradition, so I
+very much appreciate them.
+ We have, of course, Massachusetts laws that are applicable.
+One, in fact, that has been alluded to--and people should be
+clear it's a Massachusetts law--when there have been various
+references to the $18 million that Bank of America put into
+this entity known as the Massachusetts Housing Partnership,
+that's pursuant to a Massachusetts law which says that if you
+are going to have this change of ownership, a certain
+percentage of the assets have to be made available for
+affordable housing. It's been a very useful law and has
+produced a good deal of money. Sovereign obviously complied as
+well.
+ So I am very grateful to these three gentlemen for joining
+us.
+ Chairman Bachus. Thank you.
+ Having been a Member of the State Senate of Alabama, I am
+aware that being a State Legislator is a demanding and
+difficult job. In many respects, it's more difficult than being
+a Member of Congress, so I commend you with the job you're
+doing.
+ At this time, we will start with Mr. Quinn.
+
+STATEMENT OF JOHN F. QUINN, REPRESENTATIVE, MASSACHUSETTS STATE
+ HOUSE
+
+ Mr. Quinn. Thank you very much, Mr. Chairman and the other
+Members.
+ I first want to thank you as well as my Congressman,
+Congressman Frank, for being at this hearing here and the fine
+work you do. Particularly, as Congressman Frank said about my
+fishing connections, not only does Congressman Frank do a lot
+of work on the banking and financial services; he does a
+tremendous job on behalf of our area of the state.
+ Obviously, it's been a long and busy day, and a long and
+busy year in Massachusetts and the country regarding mergers
+and acquisitions; and unfortunately, I think there's really no
+end in sight. In Massachusetts there's over 300, or 200 banks
+here and certainly the bigger-is-better strategy of banks. I
+think the issues we're discussing today are not just
+appropriate for today, but for five years and ten years and
+twenty years from now. It's great and very important that we're
+here.
+ I think it's important to distinguish between really two
+types of mergers. We're fortunate, or unfortunate, to have had
+both those types in Massachusetts.
+ One, the mega-merger, where I would put the B of A/ Fleet,
+in which it's got statewide implications. They've got branches
+all across the state; and if there's going to be some negative
+impacts, they're balanced and spread out across the entire
+State.
+ The second is one such as the Sovereign/Seacoast, which
+occurred in my district and Congressman Frank's district, which
+is a high concentration of impacts. And I must say that in the
+Sovereign issue, over 300 jobs were taken out of the center of
+our major city of New Bedford, as well as the closing of 12
+branches.
+ Through that process and through participation in those two
+hearings in Massachusetts, I think I've learned, I think, that
+there's two or three holes in the approval process in the
+state, which is actually quite similar to the federal approval
+process. So the remarks I'm going to make are going to be
+applicable to both the state and federal approval process.
+ Number one--and we've heard it time and time again--not
+enough information provided at the approval hearing with not
+enough specifics. And I want to compare and contrast the
+Sovereign versus Bank of America mergers.
+ The Sovereign merger, I'm amazed I'm actually going to
+compliment them for laying off 300 people in my district; but
+the issue of process, days before the merger, hearings
+occurred. They had a plan to lay off 300 people, they had a
+plan to close twelve branches; but they also had a plan to
+retrain people and put them into other jobs in the system. They
+came actually to downtown New Bedford in the shadow of the
+headquarters that they were going to close down, and said to
+the people of southeastern Mass., this is what we're going to
+do.
+ Did we like it? No. But they were up front, told us what
+was going to happen, and we could plan for that impact.
+ Compare that, I think, with the Bank of America hearings,
+in which we've gone around and around and what was said and by
+whom and whatever else.
+ I appreciate the statements today, and I appreciate what's
+happened over the course of the last couple of weeks of three
+major announcements of bringing new jobs here, but there was no
+suggestion that there was going to be a several-thousand-
+dollars dip in employment levels in New England that would rise
+again in the first quarter of 2006. I think we all understood
+that that may occur, but I wish it was up front that we were
+told, and we could have planned for it.
+ The definitions of what a headquarters means, and what
+customer facing positions mean, those were all talked about
+after the hearing. Sovereign told us about it before; Bank of
+America after.
+ And like I say, I want to commend the steps that Bank of
+America has taken over the course of the last couple weeks; but
+I think two things caused that to happen: one, this hearing,
+and the second was the meeting which Congressman Frank and
+Congressman Capuano called for on a summer day in September, in
+the Newton Town Hall, in a hot stuffy room in which the entire
+Congressional delegation was there, and the two of you guys
+said, this is not what you said you were going to do. And lo
+and behold, a couple weeks later, they moved the wealth and
+investment management division to Boston.
+ It's unfortunate that had to occur. We're here where we
+are, and hopefully prospectively things can occur and we can
+have a positive relationship.
+ But comparing those two approaches, I think it's so
+important up front to get the specificity and the commitments.
+ And the second, the two combination issues that I want to
+talk about in closing, there's no mandatory mitigation plan
+required at the state or federal level, and there's really no
+enforcement mechanism for third-party agreements.
+ I've written down all the statements that have been made
+here today by Members and by people in the audience: binding
+obligation, non-binding obligation, unenforceable contract,
+local pledges, moral commitment, oral commitment, public
+commitment, written contract, and my favorite one, it's a
+floor, not a ceiling, when they talk about employment levels.
+ What's so wrong with writing something down and sticking to
+it, at all levels of this? Is it that bad to write something
+down? You're going to go over to an advocacy group and say, if
+you testify favorably, this is what we're going to do? Is it so
+wrong to write something down instead of using nuances and
+semantics of what a word means? I think not.
+ We've heard a lot today about this wonderful program, the
+Mass. Housing Partnership program. As Congressman Frank said,
+it's a state statute in Massachusetts, which I would strongly
+urge you look at the federal level.
+ I know the industry says, oh, it's a taking or it's a tax.
+This passed in 1990 in Massachusetts. There have been 33 bank
+mergers in Massachusetts since 1990 with almost a billion
+dollars--one billion dollars--of loans made available through
+this program. It certainly didn't hinder or deter any mergers.
+ What I proposed, and Senator Nuciforo and I have filed some
+state legislation, and I would hope you would consider it at
+the federal level, is, have what's good for housing or good for
+economic development, and backfill in the jobs that are lost.
+So there also should be a commitment, not a grant, but act as
+loan money, small business money. So we proposed an entity
+called the Mass. Development Financing Agency, having a similar
+commitment made to them.
+ So it's in statute. It's not a nuance or semantic words;
+it's in statute that that money will be available.
+ So again, I want to thank you for having this hearing here;
+and in closing, I think it's important that these mergers have
+unique impacts on our communities.
+ The distinctive character of banking requires that a
+potential loss due to mergers be given careful consideration as
+to those aspects I talked about. I hope we'll work hard on the
+state level to try and impact those, and I urge you to consider
+in particular that Mass. Housing Partnership, 1 percent or
+whatever it is. $1 billion in Massachusetts ought to be good
+for economic development as well.
+ Thank you.
+ Chairman Bachus. Thank you, Representative.
+ [The prepared statement of Hon. John F. Quinn can be found
+on page 321 in the appendix.]
+ Chairman Bachus. And Senator Nuciforo.
+ Mr. Nuciforo. Nuciforo. That's how they say it in Rome.
+ Mr. Frank. Tell me how they say it in Rome, Georgia.
+ [Laughter.]
+ Mr. Nuciforo. I don't think I could master the accent, Mr.
+Chairman.
+ Chairman Bachus. I'll tell you what: I won't try to master
+yours if you don't try to master mine.
+
+ STATEMENT OF ANDREA F. NUCIFORO, JR., SENATOR, MASSACHUSETTS
+ STATE HOUSE
+
+ Mr. Nuciforo. Thank you.
+ For the record, my name is Andrea Francesco Nuciforo, Jr.,
+and I hail from the western part of Massachusetts. I serve in
+the state Senate here in Massachusetts, and have served in the
+Senate since 1997.
+ For the last five years or so, I have also served as the
+co-chair on the Committee of Banks and Banking. I serve along
+with John Quinn, who just testified. We both serve, and have
+for a number of years now served, as Chairmen of that
+Committee.
+ I'd like to thank you personally for being here, and
+certainly to Congressman Frank, who's the Ranking Member, and
+other Members of the Committee. It's wonderful to have the
+hearing here. It gives Members access and the public access to
+this kind of proceeding that we wouldn't normally have.
+ I have already submitted written testimony, so I'm not
+going to read that. What I will do is summarize some of that
+briefly and address some of the points that have been raised by
+members of the panel previously and by some of the Congressmen
+that are here.
+ We have a pretty good idea about what is concerning
+communities, and the issue is employment. There are other
+issues that we've heard about, housing and CRA and the like,
+but the issue we're here really to talk about is the issue of
+employment.
+ We've had now a perspective of going through the '90s and
+now the last four or five years; and we know that when you have
+big bank mergers, you see some pretty big losses in employment.
+We can have lots of discussions about what brings that about,
+but there is some pretty strong evidence that these losses in
+employment are direct results of these mergers.
+ I have here in my hand a report. It's an excellent report
+that was done by the Center for Policy Analysis down at UMass
+Dartmouth in southeastern Massachusetts, and it was prepared by
+a professor there named Clyde Barrow. I have a number of copies
+of this available if Members of the Committee would like to see
+it. But this is excellent, and I would like to just quote some
+of the things from the executive summary here.
+ This report has to do with the southeastern part of
+Massachusetts, where John Quinn hails from, and this is the New
+Bedford and Fall River area that Congressman Frank represents.
+ Between 1993 and 2003, total southeastern Massachusetts
+employment in the banking industry dropped by 31 percent. 31
+percent; those are numbers like what has happened in fishing
+over 20 or 30 years.
+ Most job losses in the banking sector are directly
+attributable to mergers and acquisitions over the last ten
+years, and we know what these numbers are in that particular
+area.
+ In 1995, when Fleet came together with Shawmut, there were
+179 employees who lost their jobs.
+ In 1997, two years later, when Bank of Boston got together
+with BayBank, there were 100 employees who lost their jobs
+then.
+ Then two years after that, in 1999, Fleet and BankBoston
+got together, and that year Citizens and U.S. Trust got
+together; and those two mergers combined to cost 500 employees
+their jobs.
+ So in four years alone, in that distinct part of
+Massachusetts, some 800 people lost their job; and that's going
+up to 2003.
+ 2004 came along, and in 2004, Sovereign and Seacoast
+Financial, 350 employees. Fleet Boston with Bank of America,
+we're thinking 500 or so employees. Now, those numbers have
+changed, and I'll talk about that in a minute. And we also know
+that Webster Financial got together with First Fed America down
+in Swansea, and there was a 20 percent job loss there.
+ So we know the facts, and the facts are that when these big
+mergers take place in our communities, there are big job losses
+that result.
+ Now, while that has been a constant, there's another very
+substantial constant that we know about bank mergers; and this
+is something Congressman Frank talked about not long ago. We
+know there are spectacular executive compensation packages that
+come along with these deals.
+ Now, the eye-popping numbers back in '95, when the Shawmut
+deal happened, were $2 million. Those numbers have gone up
+substantially. They're $12 million or $15 million or $17
+million or $20 million executive payouts. Those are good
+numbers; they're big numbers.
+ And this, I think, touches on the point that Congressman
+Frank made a moment ago. We know that there are incredible
+efficiencies that are created by these mergers. We know that by
+using automation and using technology, there are big
+efficiencies and the shareholders are rewarded. But we have not
+seen those rewards go to people that are down below, and that
+is my concern.
+ It's not surprising, or we shouldn't be surprised to know,
+that when the Federal Reserve Board allowed the approvable of
+this most recent deal between Bank of America and Fleet, there
+was only one passing reference, in a 58-page opinion, to
+employment.
+ We shouldn't be surprised, because the Bank Holding
+Companies Act doesn't require that you look at employment. It
+should. Because we've seen these kinds of substantial impacts
+on employment in our communities, I do believe that this
+Committee should act and that Congress should act and that we
+should have an amendment to the Bank Holding Company Act; and
+that amendment should require that, as part of the approval
+process, we should add another factor for the Federal Reserve
+Board to consider, and that factor would be the employment
+impact, short-term and long-term impact on employment in the
+affected communities.
+ I'm not going to go on at any greater length, other than to
+say that I'm really pleased that you're here, and that you're
+here to hear from us on the state side, because we have
+watched, as a matter of state law, some smaller mergers; but
+these mega-mergers have had dramatic impacts on our
+communities, and I hope you take into consideration some of the
+comments we've made.
+ Thank you.
+ [The prepared statement of Hon. Andrea F. Nuciforo, Jr. can
+be found on page 311 in the appendix.]
+ Mr. Frank. Mr. Chairman, before we proceed, could I ask the
+others to consent to put that very good report from Clyde
+Barrow into the record.
+ Chairman Bachus. Yes, hearing no objection.
+ Commissioner?
+
+ STATEMENT OF STEVEN L. ANTONAKES, COMMISSIONER OF BANKS,
+ COMMONWEALTH OF MASSACHUSETTS
+
+ Mr. Antonakes. Thank you.
+ Good afternoon, Chairman Bachus, Congressman Frank, Members
+of the Committee and staff. My name is Steven Antonakes, and I
+serve as the Commissioner of Banks for the Commonwealth of
+Massachusetts. Thank you for the invitation to testify today. I
+have submitted written testimony which I'll be summarizing this
+afternoon.
+ Massachusetts has a longer history than most in
+experiencing interstate transactions, having passed the first
+regional interstate banking act in 1982, and a nationwide
+interstate holding company law in 1990.
+ Four years later, Congress passed Riegle-Neal, providing
+for nationwide banking. Massachusetts adjusted its law
+accordingly in 1996. Accordingly, the rules for nationwide
+holding company acquisitions have essentially been well-settled
+since 1990.
+ The Massachusetts state bank holding company act requires
+bank holding company transactions to be approved by the
+Commonwealth's Board of Bank Incorporation. I chair this three-
+member board, which also includes the Commissioner of Revenue
+and the State Treasurer.
+ The law applies to all acquisitions of Massachusetts
+holding companies as well as banks, regardless of whether the
+bank is state or nationally chartered. This provides a
+significant benefit of local review of certain transactions
+that would otherwise only require federal approval.
+ Massachusetts statutory approval requires the Board to
+determine that competition is not adversely affected and
+whether or not public convenience and advantage will be
+promoted. This includes a determination of net new benefits,
+such as initial capital investments, job-creation plans,
+consumer and business services, and commitments to maintain and
+open branch offices.
+ Other factors considered by the Board include the CRA
+rating of each bank or its subsidiary. In addition, as has been
+referenced several times today, the law requires the bank
+holding company pledge .9 percent of the assets located in the
+Commonwealth to be made available for low-cost loans through
+the Massachusetts Housing Partnership Fund.
+ Not unlike the rest of the country, Massachusetts has seen
+substantial consolidation within the banking market during the
+past 20 years. Nevertheless, the number of jobs tied to the
+Massachusetts banking industry has increased during this
+period.
+ Consolidation has allowed banks to grow stronger, thereby
+allowing banks to be more competitive, add branch offices, and
+add additional lines of business. This, in turn, has allowed
+banks to increase their employment bases over time despite
+cases of initial layoffs following mergers.
+ As a result of nearly 20 years of consolidation, however, a
+bifurcated system has emerged, both locally and nationally,
+which generally includes a small number of very large banks
+operating on a nationwide basis, and a large number of small
+community banks. The existence of very large banks has been
+authorized by federal and state law as legislators and
+regulators recognize that there could be benefits if, like
+other financial service entities, the banking system operated
+on a nationwide basis.
+ I appreciate and recognize the Committee's decision to take
+time and understand the impact of these laws, regulatory
+approvals, and consummated mergers on all interested parties. I
+also encourage the Committee to consider what needs to be done
+at the federal and state level to foster a banking system that
+remains receptive to both large nationwide and smaller
+community banks.
+ Certainly, a significant benefit exists in maintaining the
+current level of banking choice. Allow me to briefly share with
+you some of my thoughts on how to best position our community
+banks to be able to effectively compete against larger
+nationwide banks to ensure that consumers continue to enjoy the
+advantage of multiple banking options.
+ First, regulators and state legislators need to ensure a
+competitive environment exists for our state-chartered banks.
+This can be accomplished by ensuring that the state banking
+code is regularly updated and does not place state-chartered
+banks at a competitive disadvantage.
+ In addition, state banking departments need to increase
+efficiency and ensure that they complete their supervisory
+duties while minimizing examination-related regulatory burden.
+ Second, regulators, state legislators and Congress need to
+recognize the overwhelming and growing compliance burden on the
+banking industry and its disproportionate effect on smaller
+institutions. For community banks, the costs to comply with the
+litany of federal and state laws and regulations threaten not
+only their ability to compete with their larger counterparts
+and serve customer and community needs, but also threaten their
+own viability.
+ Third, thought should be given to requiring that community
+banks receive preference in the process to purchase or lease
+branches closed or divested as a result of a bank merger. This
+will allow community banks to expand their branch networks,
+maximize banking choice, and perhaps provide continuing
+employment opportunities to existing branch personnel.
+ And finally, Congress needs to continue to be vigilant
+relative to the efforts of federal bank regulatory agencies to
+preempt state consumer protection law. We should question what
+public policy goals such actions further. If federal preemption
+efforts continue, not only will consumer protection efforts be
+weakened, but federally chartered banks will gain an even
+greater advantage over smaller state banks, resulting most
+likely in the end of the community banking system as well as
+the nation's century-old dual banking system.
+ Thank you very much.
+ Chairman Bachus. Thank you.
+ [The prepared statement of Hon. Steven L. Antonakes can be
+found on page 82 in the appendix.]
+ Chairman Bachus. At this time, I'm going to yield to the
+Ranking Member. I'm also going to surrender the chair to him,
+which is permitted by our rules. You don't often see it, but
+you will today.
+ Mr. Frank. Again, I thank you. The Chairman of the hearing
+came from Alabama yesterday, and is going back today, and I
+very much appreciate his making this possible. If the majority
+had not cooperated, we couldn't have had this hearing. Thank
+you.
+ Chairman Bachus. And it is something that affects all of
+us; and from a business standpoint, we do--efficiency of scale
+is just something that businesses do, so it's something you
+almost expect them to do, to make these combinations when they
+create efficiencies.
+ It is hard on the communities, and it's hard on us, to see
+our local institutions in many cases be absorbed by
+institutions which are not locally owned. And it is something
+that is an issue; it's a growing issue across the country as we
+have more bigger banks. We have three that have almost 10
+percent of the deposits now. And while we are creating many
+smaller banks as a result--and that's what often happens, is
+people want a local bank.
+ But it's something that we'll be dealing with for years
+ahead. We appreciate your input and your continued input, and
+look forward to working in a bipartisan way to see that the
+consumers and the communities benefit from whatever the path
+that banking and financial services goes now.
+ Mr. Frank. Thank you.
+ I thank the Chairman as he leaves, and you can be sure that
+the hearing is not going to go on too much longer because I
+have to return this to Tom DeLay by 5:00.
+ [Laughter.]
+ Mr. Frank. [Presiding.] I want to begin with a couple of
+points of strong agreement with Commissioner Antonakes.
+ The last point he raised is really the subject for another
+set of ears. There is a pending action actually already taken
+by the Comptroller of the Currency preempting a wide range of
+state laws.
+ The problem is that the Comptroller of the Currency is not
+equipped to do a lot of the consumer enforcement. Indeed, we've
+got a very interesting issue of that sort that I'll be
+addressing later; but our Attorney General, Tom Reilly, is now
+engaged in trying to enforce good consumer protection against
+gift cards.
+ People go into stores and get gift cards, and what we've
+found is, people sometimes buy the gift cards, and they've got
+an expiration date that people aren't clear about, and there
+are other restrictions on them; and Attorney General Reilly
+wanted to enforce our Massachusetts consumer laws. The retail
+stores that have these cards are saying, oh, no, you can't do
+that, because we're banks. We're in effect the agents of banks
+here and the Comptroller of the Currency has preempted this.
+ Now, the Comptroller of the Currency, if that preemption
+were to go forward, has no way to make those consumer
+protections; and the Controller has stayed out of it for now,
+but this is an example of the kind of overreach that the
+Commissioner is talking about.
+ Frankly, I don't think it's an accident that it's at the
+state level that consumer protection is really best done.
+ At the federal level, with all due respect to the
+regulators, they're concerned with large systemic issues.
+Individual consumer cases aren't going to have as much impact
+there as they will have on the state and local levels, so
+that's a very important point.
+ The second point where I very much agreed with the
+Commissioner--I want to look at this--has to do with giving
+some preference when there has to be the sale of branches to
+community banks.
+ We had an example here. When Fleet and BankBoston merged,
+there was of course considerable overlap in branches. I forget
+how many branches had to be divested, but it was a very large
+number.
+ The Attorneys General at that time of both the U.S. And the
+State of Massachusetts said, well, antitrust being what it is,
+we want to take all of those branches that have to be divested
+and put them in one big package and sell them to one big
+outside bank, so that outside bank can come in and provide
+competition to Fleet.
+ And what many of us in our delegation heard was, no, don't
+do that; we don't want to have to choose between two very big
+banks. This came from our local Chambers of Commerce, local
+retailers, from people who were in the locally oriented
+businesses; they said, we would find that very difficult. And
+in fact, all of us in the Massachusetts Congressional
+delegation signed a letter urging that some of the branches be
+sold to the community banks.
+ We got some criticism from some journalists who said we
+were shilling for Fleet in doing that. And it did not come from
+banks, but from borrowers.
+ I think about 10 percent of the branches were then sold to
+community banks. We wish it had been more.
+ A year later, I was struck that the Boston Globe, which had
+been somewhat critical of Congress, wrote an article saying,
+well, that consumer satisfaction was at a much higher level in
+the smaller banks, in the smaller areas. So that notion of
+preference to community banks is very important.
+ Of course, the two come together, because one of the things
+we have is, the Comptroller of the Currency sent out a CD in
+which he tells you that if you change your charter, if you
+leave your state charter and become a national bank, he won't
+regulate you very much. It was kind of a recruitment to come be
+a national bank to the Comptroller of the Currency.
+ So I just want to express complete agreement with the
+Commissioner on those points.
+ As far as regulation is concerned, I think it is possible
+to kind of help CRA be not a burden, but I do not favor the
+cutbacks in CRA reach which we have heard about.
+ Now, to Senator Nuciforo, I just want to focus
+particularly, because he recalled us to one of the purposes of
+this hearing, and that is the job impact.
+ As I read the law, the regulators, if they choose to do it,
+have at least some leverage over the community reinvestment
+piece; but they have no leverage over the job piece.
+ And I guess we say to them, yes, well, obviously we expect
+there to be some job loss. If in fact it turned out that the
+purchase of a particular in-state bank by some out-of-state
+bank was going to totally reduce employment in a very
+substantial way, that that's something we're going to be able
+to take into account and object to.
+ Mr. Nuciforo. I think it is something that we ought to be
+able to consider.
+ I think we also have to take a look, not just at what has
+happened in the recent past, but at what is likely to happen in
+the future. Toronto Dominion recently announced its intentions
+to acquire Bank North group; and Toronto Dominion is, of
+course, based in Toronto, and has indicated on several
+occasions in the newspaper that it not only wants to have a
+very significant franchise here in the Northeast, which is
+currently Bank North, but they intend to acquire three or four
+or five other banking properties along the East Coast and
+central part of the country: Ohio, New Jersey, Pennsylvania,
+these kinds of places.
+ So we have an opportunity now to amend the law and make
+sure that, going forward, when you have other large mergers
+that are happening, we can consider employment during that
+time.
+ Mr. Frank. I'd like to be very explicit.
+ People will say efficiency is the thing. Efficiency is very
+important; it ought to be a major goal. But I think it is a
+grave error to make efficiency the only criterion.
+ We are consumers in this country; we are also producers.
+And a society in which the ability of people to earn is totally
+neglected, again, it's got an economic problem.
+ As I said, Henry Ford paid the workers at the time five
+dollars a day, and people said, what, are you nuts? In fact, in
+some areas, he was; he was this crazy conspiratorial anti-
+Semite, so he was nuts about some things, but he was a genius
+about industrial production.
+ Eventually he said, look, if I don't pay these guys a
+decent amount of money, who's going to buy the cars? And I
+think we are in danger in this country of reaching the level of
+income inequality which will produce macroeconomic problems,
+because you will have a consuming public unable to buy enough
+to sustain production. I think that's what we're seeing with
+this great disparity now, where the luxury retailers are doing
+wonderfully and the lower-end and middle- end retailers are
+doing very poorly.
+ So I do think it is a mistake to say increased efficiency
+will be the only guideline of public policy, and that we won't
+take into account both regional and even macroeconomic impacts.
+ I have over gone my time. I do want to express my
+appreciation to my legislative colleagues. I think we will be
+working together, and I did want to say particularly to John
+Quinn, we've been wrestling at the federal level with the
+question of how to fund the Housing Trust Fund. Some people
+want to take it out of the FHA, and I think that has serious
+problems.
+ I must say the analogy to the affordable housing program
+here in our Massachusetts statute here, it's a very good idea;
+so I am going to pursue that further, and we'll be in touch on
+that. Thank you.
+ Mr. Watt?
+ Mr. Watt. Very briefly, Mr. Chairman. I've been looking
+forward to calling you ``Mr. Chairman'' for a good while, so I
+can't resist calling you ``Mr. Chairman'' while I have that
+opportunity.
+ Mr. Quinn, there were a couple of suggestions that you made
+for federal legislation. Any of those things currently in the
+state legislative, state laws?
+ Mr. Quinn. Yes. As the Chairman just said, in 1990 we
+passed the state statute that requires nine-tenths of 1 percent
+of the assets within the Commonwealth that are being taken over
+to be made available for call by the Mass. Housing Partnership.
+ So it's funded over $900 million of housing programs, and I
+know that the Bank of America, on top of the $18 million grant,
+I think it's $406 million that they'll be making available over
+the next ten years.
+ Mr. Watt. Does the state have any employment criteria such
+as what was being suggested by Mr. Nuciforo?
+ Mr. Quinn. No, there is not. As part of this bill that we
+file for next session, we would require, premerger--and it's
+critical that it be premerger--to have job projections of one,
+three, and five years out by the petitioner, so that the board
+that's making the call of whether to approve it or not has in
+front of them the facts or the projections of what's going to
+happen over the next five years. So there's no requirement of a
+particular rating of employment, but at least a knowledge of
+what it may be so that a full disclosure is made premerger.
+ Mr. Watt. Do you contemplate having some sanction if the
+projections are not lived up to? Or do you suggest disapproval
+of the merger that might result?
+ Ms. Flynn. One of my suggestions, it might be scary to the
+industry, but why can't you have a conditional approval ora
+subject-to approval? If you're going to make these commitments
+up front, the approval is subject to, you're committing or
+keeping your word on what was said at the hearing.
+ Mr. Watt. What's your position on that, Mr. Nuciforo?
+ Mr. Nuciforo. I think we do this with respect to CRA. We
+give people scores. We figure out a way to determine what their
+commitment should be to CRA, and then each and every year there
+is a measurement. So we're able to say, Mr. Antonakes said a
+moment ago, that an institution is outstanding or an
+institution is not outstanding. There's got to be a way to
+similarly measure a bank's compliance with the promises it
+makes with respect to employment.
+ And keep in mind, I don't think this should be the sole
+factor; but there are seven or eight factors set forth in the
+bank holding company statute. Why not add another one that has
+to do with employment, particularly when we're seeing numbers,
+employment impacts like the kinds we're seeing right now.
+ Mr. Watt. I think I'll yield back, Mr. Chairman.
+ Mr. Frank. Thank you.
+ Mr. Capuano?
+ Mr. Capuano. Mr. Chairman, I just want to thank the
+representative of the Senate and the Commission for coming
+today. I feel as thought we're on the same page, fighting the
+same battles with the same people, and I want to thank you. I
+wish Representative Bachus were still here, because I would
+remind him, as far as I'm concerned, you both speak with
+accents. I struggled to follow each and every word you said.
+ [Laughter.]
+ Mr. Capuano. I really don't have any questions, because I
+agree with everything you said. I really have just a commentary
+to remind you of the struggles we face.
+ I know that you know the numbers in Congress, and I know
+you know that the current Administration is less than friendly
+to even the concept of regulation. Regulation is a swear word
+within the current Administration, and they look the other way
+on all kinds of things.
+ That's why, though a CRA rating of outstanding is okay,
+it's fine by me, it's better than not outstanding, it's not
+unusual; it's good, it's as good as you can get. But it's
+really not a stratified rating all that much. I actually think
+it should be rated in a more stratified way so we can really
+know who is doing more than that was necessary.
+ As far as I'm concerned, in the banking world, I've been
+doing banking law since, I don't know, 1978 with Kevin Kiley
+pretty much the whole time. I was around during the beginning
+battles of the whole debate about interstate banking that has
+now come to show that mergers aren't necessarily bad or evil in
+themselves if it works out; it actually makes room in many ways
+for smaller banks.
+ And this merger is no different. It may or may not; in the
+final analysis, it will probably be an okay thing. It's not a
+bad thing, having mega-banks around for the people who need
+mega-banks.
+ The question is, what does it mean in the long run, and
+what can we do to solve it? I know from the legislative
+perspective, I have no doubt that you feel like you have a
+tiger by the tail. What real clout do you have?
+ I won't speak for the rest of my colleagues, but I don't
+feel like I have a tiger by the tail as much as we don't have a
+tiger. We have an Administration that doesn't want to regulate,
+doesn't want to look at it; and we have a Congress right now
+that's really not all that interested even in looking at some
+of the things that you suggested.
+ Mr. Frank, obviously, is the leader of this group, and
+where he leads, we'll probably follow; and that's all well and
+good. But it's important that you know, because we know, that
+the likelihood of success in the short term is really not that
+great.
+ No matter how little it might seem, I think there's very
+little hope that we'll be able to get anything passed through
+Congress that will even approach some of the things
+Massachusetts has done or the things you've outlined.
+ I do think we should work on them, and I'm sure we will;
+but I think, like with many things, the leadership really has
+to come from the Commonwealth. You've done a great job thus
+far, you've done what you can do within the limits of the mega-
+merger world, and I encourage you to do more, and as we go
+forward, my hope is that little by little, first of all, the
+people who are doing the mergers don't see us as the enemy.
+Sometimes they will, and that's inevitable. But I don't think
+I've heard anything here today that has been extraordinary. All
+we're asking for is plans. As you said, Representative, what
+are the plans? What are you going to do? How can we deal with
+it? How do we move on?
+ We all know that yesterday's ways of doing business, not
+just in the banking world, but everywhere. Manufacturing, we've
+been through manufacturing. Even the fishing industry is
+changing daily. And our job is to try to figure out, okay, how
+do we help the people that are left behind? How do we then
+catch them up?
+ Again, I just want to thank you for coming today. Thank you
+for your leadership on these issues and others, and to pledge
+to you our support of your efforts and our cooperation as we
+move forward.
+ Mr. Frank. Just a brief comment on what my colleague said.
+It's true with regard to any major legislative changes in the
+direction we'd like to see, they're highly unlikely.
+ There is one possible exception. That is, as Commission
+Antonakes noted as the Bank Commissioner, on a bipartisan
+basis, every state bank commissioner and every state Attorney
+General has expressed serious concern about the reach of the
+preemption by OCC, and I think there may be a chance for us to
+work together on that.
+ The only thing I would say is this: It is true that we are
+unlikely to be able to get passed some of the legislation we
+want to get passed. On the other hand, our friends in the
+banking industry have some legislation in some cases that they
+would like to see passed.
+ And the important principle to remember legislatively is
+that the ankle bone is connected to the shoulder bone, so there
+may be some basis for negotiation there.
+ Ms. Lee?
+ Ms. Lee. Thank you very much, Mr. Chairman. I too want to
+thank our panelists, coming from the state legislature to
+Congress. I understand, first of all, the power of state
+legislators at this point, and so I appreciate all of your
+progressive moves here in the State of Massachusetts, and want
+to comment on Commissioner Antonakes' comment with regard to
+caution as it relates to federal preemption.
+ You know, oftentimes many of us find ourselves on the other
+side of the states' rights argument when it comes to federal
+preemption of laws relating to the government and the financial
+services industry.
+ Case in point: I just want to ask your thoughts on this.
+When we passed, of course, the Fair Credit Reporting Act, many
+of you know that California has much stronger consumer
+protection requirements than many states, and of course we had
+a battle around that.
+ Some of the discussion, and I have an amendment--well,
+several amendments, but one was to make the federal standard no
+less than the strongest state standard. Of course, that got
+shot down.
+ Another one was to allow California and other states which
+had stronger consumer protection requirements, allow those
+states to be grandfathered in. Well, that got shot down. But
+I'm pleased that our Chairman was able to help us mitigate
+against some of the negative preemptive aspects of that as the
+bill went through the House.
+ And then the other option could be that the standard, the
+federal standard, should be the floor rather than the ceiling.
+ But now we're faced with, again, looking at predatory
+lending, which will be coming up. We've had many discussions
+about this, and I'd like to get your take with regard to what
+the options are for us at the federal level to ensure that,
+again, states' rights provisions prevail where the consumer is
+better protected.
+ Mr. Antonakes. Thank you very much.
+ First, I should acknowledge really the leadership role that
+Chairman Frank has taken on matters regarding federal
+preemption.
+ I think it's a delicate issue in many respects, in that you
+want to recognize that we do have a dual banking system. You
+don't want to unnaturally impinge on the ability of national
+banks to compete nationally and globally, and do their business
+without undue interference from the crazy quilt of state laws
+that exists.
+ But I think specifically in areas relative to consumer
+protection, that state laws should be recognized; and if a
+decision is made to roll back state laws, the appropriate place
+for that to come from is Congress and not from a federal agency
+without public debate.
+ Mr. Nuciforo. If I could say something about that, it was,
+I think, 1999 or 2000 when the issue of ATM surcharging came
+up, and I know this was debated widely across the country. And
+here in Massachusetts, several of us, including me, filed bills
+that would limit the ability of banks to surcharge.
+ That kind of bill was stalled in the state legislature for
+a variety of reasons, one of which was that there was a case
+proceeding in the federal courts in Connecticut that was
+addressing the same issue. The case there was whether the OCC
+and its rules could preempt any state consumer protections in
+that area, ATM surcharging. The federal opinion went against
+us, as I recall.
+ So we have seen from the federal side preemptions of a
+whole host and a whole variety of consumer protections that are
+enacted in state law. Predatory lending, I suspect, will be the
+next one.
+ But I do think that to the extent you've got any ability as
+a Committee or as a Congress sitting as a whole to specifically
+limit the ability of the federal regulators, OTS, OCC, the
+others, to preempt us, it would make a difference.
+ Ms. Lee. How would you suggest that the grandfathering in
+states would have stronger consumer protections? I mean, what
+would be your specific suggestion?
+ Mr. Nuciforo. Well, I think states generally get the kinds
+of consumer protections that they deserve and that they want.
+What's good for consumers in Massachusetts might not be the
+kinds of protections that they would choose in Alabama or in
+California or elsewhere.
+ So I do think that there should be some effort to seek the
+level of consumer protection required by people on the state
+level.
+ Now, how you do that, how you craft that kind of provision
+in Congress, you're the experts on that; I'm not. But that's
+the goal I think we should be moving towards.
+ Mr. Quinn. I'll just add quickly, you ought to have the
+federal law be a floor, not a ceiling, and to allow the
+grandfathering of existing laws. Predatory lending is a perfect
+example, for the 25 states that have passed predatory lending
+laws. National banks say, A, we don't do predatory loans; but
+B, your laws aren't going to apply to us anyway. So it puts us
+in a tough situation.
+ Then there's always the implicit threat that if it gets too
+tough in Massachusetts, we'll just flip to a federal charter,
+and we'll see you later. So it's a delicate balance, but I
+support the grandfathering and making the federal law no less.
+ Ms. Lee. Thank you very much. Thank you, Mr. Chairman.
+ Mr. Frank. I just wanted to say to Commissioner Antonakes,
+illustrating part of the principle, which is there are some
+things that are core banking functions, and I don't think--we
+passed a law about check truncation; I wouldn't let the states
+interfere with that. Deposit insurance.
+ What we need to do is distinguish. On the other hand, you
+have a claim that there's a preemption if a state tries to
+regulate gift cards which are issued by a retailer, because
+ultimately the retailer is financed by a bank. I think that's
+one of the things we have to determine, is what is or isn't in
+the core banking function.
+ Now, some traditions ought to be maintained, so the last
+word will go to a New Yorker.
+ Mr. Meeks?
+ Mr. Meeks. Thank you, Mr. Chairman. And I really don't have
+many questions. I'll be real brief, also.
+ I want to thank all of you for being here and for
+participating in this hearing. I want to thank the Chairman,
+because I think you were right when you urged us to come here,
+that this indeed affects your state in Massachusetts, but it
+has some broader ramifications for all of us, whether you come
+from California, New York or North Carolina. So I want to thank
+you for putting this together and thank everybody that
+participated.
+ I mentioned to the Chairman earlier--and I do like that
+word, Chairman Barney Frank is sitting there, so I'll use it as
+often as I can, also--I mentioned to the Chairman a few minutes
+ago that I was tremendously impressed, particularly when we had
+the not-for-profit organizations that were before us and the
+way that they seemed organized as well as the way they seemed
+empowered to negotiate with the banks, et cetera.
+ I guess my only question would be, the fact that the way
+that Massachusetts law is written, that all the bank mergers
+have to go through the Massachusetts bank board, do you think
+that has an effect to empower community organizations so that
+they are able to negotiate and try to work together to follow
+through to make sure that the communities' needs and
+requirements are being taken care of?
+ Mr. Antonakes. Congressman, I think it certainly does. I
+think the aspect of local review is very important; the fact
+that we have a public hearing here in Massachusetts, often try
+to have it in the community that's most impacted by a merger.
+ We had, as was referenced, and Representative Quinn had
+requested, we had our hearing on the Sovereign-Seacoast
+application in New Bedford. We had the Fleet/Shawmut hearing
+back several years ago in Worcester, where that was the city
+that was most impacted by the merger as well. And I think local
+review and the approval process does to some degree empower
+local community groups and further fosters a good dialogue
+between banks and those organizations.
+ Mr. Nuciforo. I would agree with everything the
+Commissioner just said.
+ We have here in Massachusetts something called the Board of
+Bank Incorporators, and the Board of Bank Incorporators is the
+Commissioner of Banks and the Commissioner of DOR and the State
+Treasurer. Those three sit as a board to decide, upon
+application from merging banks, whether there are net new
+benefits resulting from this merger. Part of that is actually
+the jobs issue, but there are many other factors.
+ My good friend John Quinn here has filed a bill, and I
+think it's a terrific bill, that would beef up the net new
+benefits criteria so that we could take a look at specifically
+employment and the impacts on the local economic condition as a
+result of these things.
+ Mr. Meeks. Thank you.
+ Mr. Frank. Thank you.
+ The representative from California.
+ Ms. Lee. Thank you.
+ Before I leave, I just would like to thank the Chairman for
+bringing us all together today for this hearing, and I wanted
+to say that what I have heard here today really gives me a lot
+of hope in terms of the B of A/Fleet Boston merger. I wish,
+when B of A departed the Bay Area, that we would have had these
+types of constructive discussions ahead of the curve.
+ I think that the negative impact in terms of employment, in
+terms of economic impacts and in terms of all of the issues
+that we are still dealing with in the Bay Area as a result, we
+may have been able to--we would have been in better shape. So I
+want to commend you, Chairman Frank, and commend all of you for
+being here today.
+ Mr. Frank. Thank you, and I hope the Massachusetts groups,
+while obviously they're not fully satisfied, will reflect on
+that, which is that yes, this process has been helpful; and I
+think we have come out of this, or are going to be coming out
+of it, better than we might have.
+ I just, in closing, again want to thank--the gentleman from
+North Carolina?
+ Mr. Watt. Mr. Chairman, I ask unanimous consent that I be
+allowed to submit for the record a series of newspaper
+articles.
+ I do this because, on the way here, I was going through,
+and there was an identification of so many different local
+impacts that mergers are having, not only in connection to
+community jobs, but the kinds of contributions that are being
+made to non-profits, to charitable institutions. Sometimes the
+larger the merged institution and the further away it is, it
+changes the quality of the charitable contributions.
+ Some of those things are reflected in these newspaper
+articles, which I also would encourage the banking interests to
+take a look at. It's a whole myriad of things that are kind of
+set into motion as a result of a merger.
+ Mr. Frank. Without objection, they'll be put in the record.
+ I just want to close by thanking people. First of all, the
+witnesses really set a good example here. I wish we had
+witnesses--let me just say, these kind of field hearings are
+sometimes, frankly, road shows, dog-and-pony shows, where we
+look good.
+ This has been one of the more substantive hearings that I
+have been in as a Member of the Committee, and I want to thank
+my colleagues. I hope everyone in the area appreciates that
+getting nine Members of Congress a couple weeks before
+Christmas isn't easy. Five of our colleagues are from out of
+town. Four of them are from Massachusetts. The witnesses were
+all very good in their testimony. They were on point. They
+responded to questions.
+ Finally, when we have hearings in Washington, it's pretty
+routine; but to bring nine Members of Congress and all these
+witnesses and everything else 400 miles away is a lot harder
+than it may look.
+ So to both the Republican and Democratic staffs, my deepest
+appreciation. This has been a very well-run hearing, and we've
+had good substance. We haven't lost a Member yet. We have a
+couple more to get to the airport, but I think we'll be okay;
+but I really am appreciative of the staff.
+ As I said, it's hard to kind of export this, and I think
+this has been done very smoothly from the recordation to the
+presentation of the witnesses.
+ So I just want to thank everybody, and also note that if I
+hear no objection, the record will remain open for 30 days; and
+I should tell the witnesses, what that means is that Members of
+the Committee will have the option, including some who weren't
+here, of submitting questions to us, which we will transmit.
+ If any Member of the Committee has a question that they
+would like put to a witness, we will submit that, and the
+witness will have a chance to answer. And we will keep the
+record open, which means, one, if the Members think about
+something, they can do it; and, two, if any witness feels he or
+she wasn't asked something he or she wanted to be asked and has
+a point they want to make, it's not hard to find a Member to
+ask you.
+ [Laughter.]
+ Mr. Frank. And the responses will be placed in the record.
+ Hearing no objection to that, it is so ordered; and the
+hearing is adjourned.
+ [Whereupon, at 2:12 p.m., the committee was adjourned.]
+
+ A P P E N D I X
+
+
+
+ December 14, 2004
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