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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.
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    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.
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    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.
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    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.
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    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.
    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.
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    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.
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    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.
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    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.
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    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?
    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.
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    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.
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    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.
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    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?
    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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?
    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.
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    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.
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    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.
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    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.]
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    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.
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    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?
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    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?
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    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.
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    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——
    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.
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    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.
    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.
    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.
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    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.
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    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.
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    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.
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    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.
    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?
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    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.
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    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.
    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.
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    Chairman BACHUS. We were also getting tired of it, you know.
    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.
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    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.
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    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.
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    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?
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    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.
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    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?
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    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.
    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.
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    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.
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    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.
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    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?
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    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.
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    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.
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    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?
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
    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.
    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.
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    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.
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    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.
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    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.
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    Chairman BACHUS. Thank you.
    [The prepared statement of Anne Finucane can be found on page 277 in the appendix.]
    Chairman BACHUS. Mr. Campanelli.
    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
    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.
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    Well, if it was up to some people at the Bank of America, maybe I wouldn't be in office.
    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.
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    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.
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    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.
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    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.
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    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?
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    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.
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    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?
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    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.
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    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.
    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.
    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.
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    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.
    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.''
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    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.
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    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.
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    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.
    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——
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    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.
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    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.
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    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.
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    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.
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    Mr. TIERNEY. Thank you. I feel a little bad for Mr. Campanelli here, but I don't think he feels too bad about it.
    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——
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    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.
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    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.
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    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?
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    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.
    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.
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    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.
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    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.
    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.
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    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.
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    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.
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    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.
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    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.
    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.
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    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.
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    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.
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    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.
    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
    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.
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    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?
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.
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    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.]