Testimony Prepared for 

Public Hearing on Proposed Merger of Fleet and Bar&Boston 

at the 

Federal Reserve Bank of Boston 

on 

July 7, 1999 

bY 

Jim Campen 

Associate Professor of Economics 

University of Massachusetts Boston 

My name is Jim Campen and I am an Associate Professor of Economics at the University of 

Massachusetts Boston. Last year I completed a two-year term as a member of the Boston Fed’s 

Community Development Advisory Council. I will focus my comments today on the issue of mortgage 

lending to traditionally underserved borrowers, an issue on which I have completed several studies in 

recent years. 

1. MY June report. In early June I released a report entitled “Does One Plus One Equal More Than Two? 

- Or Less Than One? A Study of Mortgage Lending Before and After Recent Mergers by Fleet and 

BankBoston.” (A copy is attached; it has previously been entered into the record for this application.) 

The main finding of this study was that - both in the city of Boston and in all of Massachusetts - lending 

to black, Latino, and low- and moderate-income (LMI) borrowers by Fleet in 1998 was approximately 

half of the total lending to these borrowers by Fleet and Shawmut combined in 1995. That is, the result of 

this most recent Fleet merger was “1 + 1 = 1.” In contrast, I found that lending to these borrowers by 

BankBoston in 1998 was approximately equal to the total lending to these borrowers by Bank of Boston 

and BayBanks combined in 1995. That is, the result of the most recent BankBoston merger was “1 + 1 = 

2.” Fleet’s performance, but not that of BankBoston, fell far short of meeting the criteria of “1 + 1 > 2” 

that was emphasized by CEO’s Murray and Gifford at their joint March 15 press conference. 

My findings may be illustrated by one example (from Panel D of Table 1). LMI borrowers purchasing 

homes in the city of Boston in 1995 received 274 loans from Fleet and 400 loans from Shawmut, for a 

total of 674 loans. In 1998, Fleet made 335 loans, for a decrease of almost exactly half (the percentage 

decrease of 50.3% is reported in the right hand column). The same borrowers received almost as many 

loans from Bat&Boston in 1998 as from Bank of Boston and BayBanks combined three years earlier (the 

total fell from 269 loans to 255, a decrease of 5.2%). This particular finding is chosen as representative, 

not extreme; the same general pattern exists whether one looks at Boston or the entire state; at loans to 

blacks, to Latinos, or to LMI borrowers; at starting dates of 1994 or 1995 or ending dates of 1997 or 

1998. And the findings reported for New York, New Jersey, New Hampshire, and Connecticut in Table 3 

are even stronger than those for Boston in Table 1 and Massachusetts in Table 2. 

2. Fleet’s response. Fleet’s principal response to my findings was stated in a June 29 letter from William 

Mutterperl to the Boston Fed’s CRA Officer, Richard Walker. Mr. Mutterperl points out that Fleet has 

ranked first in market share of lending to black, Latino, and LMI borrowers and that the percentage of its 

total loans that go to these borrowers is substantially above the industry average. This, of course, is not a 

refutation of my findings. Rather, Mr. Mutterperl has, perhaps unwittingly, underlined exactly why the 

substantial drop in Fleet’s mortgage lending to these borrowers following its merger with Shawmut is so 
significant. It is precisely because Fleet and Shawmut had such strong performance in lending to 

traditionally underserved borrowers that their decline matters so much. 

When a major lender cuts back its lending to middle- and upper-income households there is no reason for 

public policy concern, because there are plenty of other lenders aggressively seeking to lend to these 

borrowers. But when the largest lender to traditionally underserved borrowers cuts back substantially, 

there is a shortage of other lenders who will step in and take up the slack. Thus, even though Fleet’s 

cutback in lending to minority and LMI borrowers was approximately proportional its cutback in overall 

lending, while total lending (by all lenders) to all borrowers rose by 29% between 1995 and 1997, total 

lending (by all lenders) to black and Latin0 borrowers fell by 1% during the same period. 

When the two largest lenders to minority and LMI borrowers merge, it is possible for the subsequent 

lending of the surviving institution to fall to the level of the merger partner with the lower level of lending 

(that is, to fall by more than 50%, so that “l+l<l), while that surviving institution retains the positions of 

the largest single lender to blacks, Latinos, and LMI borrowers. Indeed, Fleet and Shawmut were by far 

the largest such lenders in 1995, and Fleet remains, as Mr. Mutterperl says, the largest lender. 

At this time, Fleet and BankBoston are the two largest lenders to minority and LMI borrowers. I doubt 

that Mr. Mutterperl means to suggest that it would be all right if the lending to these borrowers by the 

institution resulting from the proposed merger were to fall by 50% - as long as that institution retained a 

number one market share and continued to make a high percentage of its loans to these borrowers. 

3. New results for six Massachusetts MSAs. I have attached to the written version of my testimony six 

newly completed tables that replicate for six Massachusetts metropolitan areas (MSAs) the analysis 

previously done for the City of Boston and the state of Massachusetts. These tables, numbered Tables 4 - 

9 so as to not duplicate the table numbers from my June report, present new results for the three biggest 

MSAs in the state - Boston, Worcester, and Springfield - as well as for the three MSAs in the 

southeastern part of the state. ) I particularly call your attention to the tables for Springfield (Table 5) 

and New Bedford (Table 7). 

In Springfield, the state’s second most populous MSA, between 1995 and 1998 Fleet’s home-purchase 

loans to blacks fell from 46 loans to just 2, to Latinos from 99 loans to just 10, and to LMI borrowers 

from 226 loans to just 38. (The corresponding percentage declines, shown in the right-hand column were 

95.7%, 89.9%, and 83.2%, respectively.) Meanwhile BankBoston’s lending to blacks and Latinos 

combined, as well as their lending to LMI borrowers, increased. 

In New Bedford, the state’s poorest MSA, (Table 7) total lending by both Fleet and BankBoston dropped 

precipitously. Total loans to blacks and Latinos by the two banks combined fell from 23 loans to 3, while 

total lending to LMI borrowers by the two banks combined fell from 127 loans to just 11. These dramatic 

numbers seem to me to offer grounds for serious concern, although I calculated them too recently to have 

had an opportunity to pursue any explanation of why lending in that city by these two banks fell so far 

and so fast. 

4. The impact of branch/deposit divestitures on the “1 + 1 > 2” criteria. Fleet and BankBoston have 

suggested that the criterion of “1 + 1 > 2” should be modified to take into account the fact that the postmerger, post-divestiture institution will be only about 80% as large as the combined size of the two 

current banks - that is, that the appropriate criterion should be “1 + 1 > 1.6.” 

However, there is no guarantee that a bank acquiring divested branches will in fact engage in mortgage 

lending that will make up for a drop in lending by the divesting institution. I am aware of two cases in the 

last round of mergers where a substantial number of branches and deposits in a single MSA were divested 

to a single institution. 
Table 8 

MORTGAGE LOANS FOR HOME PURCHASES IN THE MASSACHUSETTS 

PART OF THE PROVIDENCE, FALL RIVER, WARWICK MSA” 

Before and After Recent Mergers by BankBoston and Fleet, 1994 - 1998 

* 

Data sources: 

Low/Moderate Income (LMI): 

Table Prepared by: 

Most of this MSA is in Rhode Island; this table includes only loans in th Massachusetts part of the MSA. 

Loan Application Registrar (LAR) data made available in accordance with the Home Mortgage Disclosure Act 

(HMDA). 1994-1997 data from CDs distributed by the Federal Financial Institutions Council. 1998 data obtained 

directly from BankBoston and Fleet. Data include all loans by identifiable afliliatates of lenders named. 

Defined for this table as up to 80% of the median family income in the Boston MSA. The maximum income to 

qualify as LMI was $41,000 in 1994, $42,000 in 1995. $45,000 in 1996, and $48,000 in 1997 & 1998. 

Jim Campen, UMass/Boston, July 6, 1999 
Table 9 

MORTGAGE LOANS FOR HOME PURCHASES IN THE BARNSTABLE-YARMOUTH MSA 

Before and After Recent Mergers by BankBoston and Fleet, 1994 - 1998 

Data sources: 

LowModerate Income (LMI): 

Table Prepared by: 

Loan Application Registrar (LAR) data made available in accordance with the Home Mortgage Disclosure Act 

(HMDA). 1994-1997 data from CDs distributed by the Federal Financial Institutions Council. 1998 data obtained 

directly from BankBoston and Fleet. Data include all loans by identifiable aftiliatates of lenders named. 

Defined for this table as up to 80% of the median family income in the Boston MSA. The maximum income to 

qualify as LMI was 841,000 in 1994, $42,000 in 1995, $45,000 in 1996, and $48,000 in 1997 & 1998. 

Jim Campen, UMass/Boston, July 6, 1999 
Does One Plus One Equal More Than Two? - Or Less Than One? 

A Study of Mortgage Lending Before and After 

Recent Mergers by Fleet and BankBoston 

bY 

Jim Campen 

Associate Professor of Economics 

University of Massachusetts/Boston* 

June 1999 

*Home office durinn summer 1999: 

17 Kelly Road, Cambridge MA 02139 

617/354-5330 (phone) 

617/354-1216 (fax) 

campen@banet.net 
Introduction 

At the March 15 press conference held to discuss the proposed merger of their two companies, 

CEO’s Terry Murray of Fleet and Chad Gifford of BankBoston emphasized a theme that was featured 

prominently on several of the slides projected for their audience: “1 + 1 > 2.” They argued, in other 

words, that the combined institution resulting from the merger would be able to do more for its 

stockholders, customers, and communities than the sum of what the two pre-merger institutions have 

done separately. 

On that same day, I completed a brief study that examined the impact on mortgage lending in 

Boston of the mid-l 990s mergers that had reduced the number of big banks in the city from four to two. 

That study compared the combined lending of Bank of Boston and BayBanks before their merger to the 

lending of Bar&Boston in 1997, and the combined lending by Fleet and Shawmut before their merger to 

the lending of Fleet in 1997. In addition to looking at total home purchase loans in Boston, it presented 

data on lending to black, Latino, and low- and moderate-income (LMI) borrowers. The findings were 

dramatic: Fleet’s 1997 lending, both overall and to each of these three categories of traditionally 

underserved borrowers, was approximately half of what Fleet and Shawmut had done jointly in 1995. In 

contrast, while Bar&Boston made 32% fewer total loans in 1997 than Bank of Boston and BayBanks had 

made in 1997, it actually made more loans to black and LMI borrowers in 1997 than had been made by its 

two predecessor banks in 1995, and its loans to Latinos were down by only IO%.’ 

The present study expands my earlier study in three ways. First, I have updated the analysis of 

lending in the city of Boston through 1998 (Table l), using data obtained directly from Fleet and 

BankBoston. Second, I have provided a parallel analysis of all lending in the state of Massachusetts 

(Table 2). Finally, I have prepared a summary presentation that juxtaposes my analysis of Fleet’s lending 

in Massachusetts to the results of before-and-after analyses (by others) of Fleet’s mortgage lending in 

New Jersey, New York, Connecticut, and New Hampshire from 1995 to 1997 (Table 3). 

Summary of Major Findings 

In the aftermath of Fleet’s recent mergers, mortgage lending has fallen far short of the “1 + 1 > 2” 

standard emphasized by CEOs Murray and Gifford. In fact, in the great majority of cases, Fleet’s 

post-merger results can be characterized as “1 + l-4.” That is, post-merger mortgage loans 

by Fleet have been less than half as great as the combined number of loans by the pre-merger 

institutions. This is true whether one looks at mortgage lending in Boston, in all of Massachusetts, 

or in any of the four other northeastern states examined. It is true whether one looks at overall 

lending, at lending to blacks, at lending to Latinos, or at lending to low- and moderate-income 

(LMI) borrowers. It is true whether one looks at data for 1997 or for 1998. And it is true whether 

one looks at just Fleet and Shawmut (in MA, CT, and NH) or at Fleet, Shawmut, and NatWest (in 

NJ and NY). 

’ This one-page study, entitled “Does One Plus One Equal More than Two? Or Is It Less ? Data on Mortgage Lending in the City 

of Boston by Boston’s Big Four Banks of the Early and Mid-1990s - Before and After the Mergers that Resulted in Two Big 

Boston Banks for the Late 199Os,” received considerable publicity. Its findings were featured in a Boston Herald article by Joe 

Bartolotta (“Merger Worries Housing Advocates,” March 17) and in a Boston Globe lead editorial (“BankBoston’s Good 

Example,” March 22). Soon after this, a Fleet staff member contacted me to say that Fleet’s numbers didn’t agree with mine; we 

arranged an April 8 conference call to discuss the differences. It turned out that Fleet’s numbers were larger than mine, in every 

category for every year, but that they showed very similar percentage reductions. For example, while I found that loans to blacks 

had declined from 439 in 1995 to 200 in 1997 - a decrease of 54.4%% - Fleet’s numbers indicated that loans to blacks had 

declined from 5 17 to 244 - a decrease of 52.8%. (Much, but not all, of the differences between our numbers can be explained by 

my elimination of double-counting of Soft Second loans in Fleet and Shawmut’s HMDA data [see footnote to Tables 1 and 21). 

* Although the Federal Financial Institutions Examination Council will not release its comprehensive, processed Home Mortgage 

Disclosure Act (HMDA) data for 1998 until late this summer, individual lending institutions must provide their own HMDA data 

within thirty days of a request made any time after March 1. 
-2- 

* The right hand columns of Tables 1 - 3 present the percentage changes from pre-merger to postmerger in the loans made by Fleet overall, and to black, Latino, and low- and moderate-income 

(LMI) borrowers. All of the approximately twenty changes were decreases, and all but two of 

these decreases were greater than 50%. The only smaller decreases were a 39.2% drop in lending 

to Latinos in Boston (from 143 loans in 1995 to 87 in 1998), and a 49.6% drop in lending to 

Latinos statewide (from 536 loans in 1995 to 270 in 1998). The biggest decreases were in loans 

to blacks and Latinos in New York, and to LMI borrowers in New Hampshire, all of which fell by 

more than 70%. The following examples are representative, rather than particularly dramatic: 

l In Boston, Fleet and Shawmut combined made 674 loans to LMI borrowers in 1995, while 

Fleet made just 335 loans to LMI borrowers in 1998 - a decrease of 50.3%. 

l In Massachusetts, Fleet and Shawmut combined made 702 loans to black borrowers in 

1995, while Fleet made just 334 loans to black borrowers in 1998 - a decrease of 52.4%. 

l In the four northeastern states for which analyses were conducted, Fleet, Shawmut, and 

NatWest made a total of 1,575 loans to Latin0 borrowers in 1995, while Fleet made just 600 

loans in 1997 - a decrease of 61.9%. The decreases in Latin0 lending in individual states 

ranged from 53.4% in New Jersey to 72.8% in New York. 

l In strong contrast, the merger of Bank of Boston and BayBanks has been followed by levels of 

mortgage lending to traditionally underserved categories of borrowers that are generally 

consistent with a standard of “1 + 1 = 2.” That is, the numbers of loans made to black, Latino, 

and LMI borrowers made by the post-merger BankBoston have been, on average, approximately 

equal to the total numbers of loans made by Bank of Boston plus BayBanks before the merger. 

This has been the case even though BankBoston’s total lending to all borrowers fell substantially 

between 1995 and 1998 - by 38.0% in Boston and by 5 1 .l% statewide. 

l Black borrowers purchasing homes in Boston received 123 loans from Bank of Boston and 

BayBanks combined in 1995, while they received 143 loans from BankBoston in 1998 - an 

increase of 16.3%. Statewide, lending to blacks decreased by less than one percent. 

l Latin0 borrowers purchasing homes in Boston received 50 loans from Bank of Boston and 

BayBanks combined in 1995, and exactly the same number from BankBoston in 1998. 

Statewide, lending to Latinos increased by 83.3% - from 192 loans in 1995 to 352 loans in 

1998. 

l LMI borrowers purchasing homes in Boston received 269 loans from Bank of Boston and 

BayBanks combined in 1995, while they received 255 loans from BankBoston in 1998 - a 

decrease of 5.2%. Statewide, lending to LMI borrowers fell by 17.9%. 

A Concluding Comment on Why These Findings Matter 

Although the substantial decreases in overall mortgage lending that followed the recent mergers 

of Fleet and BankBoston represent a notable departure from the “1 + 1 > 2” standard emphasized by the 

two banks’ CEOs, they provide little reason for community or public policy concern. Middle-class and 

affluent homebuyers face no shortage of mortgage lenders eager to provide mortgages at competitive 

rates. For example, even though overall mortgage loans in the City of Boston by Fleet and BankBoston 

and their merger partners fell by 42.2% between 1995 and 1997, overall lending in the city by all 

lenders still increased by 28.7%.3 

3 My calculations, from HMDA data. Loans by the biggest banks fell from 1,714 in 1995 to 990 in 1997, while loans by all 

lenders rose from 4,637 to 5,970. Statewide, the pattern was very similar: loans by the biggest banks fell by 51.3% (from 10,920 

loans in 1995 to 5,320 in 1997), while loans by all lenders rose 29.3% (from 65,056 loans in 1995 to 84,091 in 1997). 
-3- 

The case is quite different, however, when it comes to traditionally underserved borrowers. 

Minority and lower-income households have benefited greatly in the 1990s from special mortgage loan 

programs offered by the biggest Boston banks. The big banks’ capabilities and resources have allowed 

them to offer loan products, plus marketing and delivery systems, that smaller lenders can’t match and 

that large out-of-state mortgage companies - not subject to regulatory review of their performance with 

respect to the mandates of the Community Reinvestment Act - have shown no interest in duplicating. 

As a result, Fleet and BankBoston, combined with Shawmut and BayBanks, gained disproportionately 

large market shares of all lending to these households. For example, while they made 37.0% of all 

home-purchase loans in Boston in 1995, they made 63.8% of all loans to black and Latin0 borrowers in 

Boston in that year. 

Given the special role played by the biggest banks in lending to traditionally underserved 

borrowers, there are strong grounds for fearing that a drdp in post-merger mortgage lending to these 

borrowers by the proposed Fleet Boston could result in their experiencing a net loss of loans. Indeed, 

this is precisely what happened following the last round of mergers. Between 1995 and 1997, a 40.1% 

decrease in Fleet plus Bar&Boston’s lending to blacks and Latinos was accompanied by a decrease 

of 1.1% in total lending to these borrowers - even though, as noted above, a slightly larger 

(42.2%) decrease in Fleet plus BankBoston’s overall lending was accompanied by a 28.7% 

increase in total lending by all lenders.4 

Accordingly, there are excellent reasons for communities to insist - and for regulators to require 

-that the new institution be committed to achieving its stated standard of “1 + 1 > 2” for mortgage 

lending to traditionally underserved borrowers. While the record of Fleet in its recent mergers offers 

grounds for deep concern, the record of BankBoston - by showing that the standard is one that can be 

achieved - offers grounds for hope. 

4 My calculations, from HMDA data. Loans to blacks and Latinos by the biggest banks fell from 755 in 1995 to 542 in 1997, 

while loans by all lenders fell from 1,183 to 1,170. Statewide, the pattern was similar: loans to blacks and Latinos by the biggest 

banks fell 39.5% (from 1,642 in 1995 to 993 in 1997), while loans by all lenders rose 7.3% (from 4,262 in 1995 to 4,575 in 

1997). 
Table 1 

MORTGAGE LOANS FOR HOME PURCHASES IN THE CITY OF BOSTON 

Before and After Recent Mergers by BankBoston and Fleet, 1994 - 1998 

1995 to 1998 

Data sources: 

Data adjustment: 

Low/Moderate Income (LMI) 

Table Prepared by. 

Loan Application Registrar (LAR) data made available in accordance with the Home Mortgage Disclosure Act 

(HMDA). 1994-1997 data from CDs distributed by the Federal Financial Institutions Council. 1998 data obtained 

directly from BankBoston and Fleet. Data include all loans by identifiable afliliatates of lenders named. 

Loan totals have been adjusted, for loans in the city of Boston only, so that only one loan is counted for each 

home purchased under the Soft Second Loan Program. In many cases, HMDA data include both the tirst 

and the (soft) second mortgage loans originated for these home purchases. This time-consuming adjustment, 

which I believe improves the meaningfulness of the data, results in loan totals lower than those calculated by 

others from the raw HMDA data. However, the effects of this adjustment on the percentage changes reported 

in the right-hand column of the table above are minor. The total number of duplicate (soft second) 

mortgages eliminated from my database are: 

BankBoston+BayBanks: ‘94 -- 54 loans; ‘95 -- 29 loans; ‘96 - 10 loans, ‘97 - 7 loans; ‘98 - no loans 

Fleet+Shawmut: ‘94 - 135 loans; ‘95 - 142 loans; ‘96 -- 99 loans; ‘97 -- 91 loans; ‘98 -- 68 loans 

Defined for this study as up to 80% of the median family income in the Boston area. The maximum income to 

qualify as LMI was $41.000 in 1994, $42,000 in 1995, $45,000 in 1996, and $48,000 in 1997 & 1998. 

Jim Campen, UMass/Boston, June 7,1999 
Table 2 

MORTGAGE LOANS FOR HOME PURCHASES IN THE STATE OF MASSACHUSETTS 

Before and After Recent Mergers by BankBoston and Fleet, 1994 - 1998 

% change 

1995 to 1998 

D. Loans to Low- and Moderate-Income Borrowers 

BankBoston 736 582 862 1,038 1,145 

BayBanks 781 812 470 0 0 

SubTotal 1,517 1,394 1,332 1,038 1,145 -17.9% 

, 

Fleet1 -1,326 1 1,458 1 2,247 1 1,513 1 1,503 1 

Data sources 

Data adjustment 

Low/Moderate Income (LMI): 

Table Prepared by: 

Loan Application Registrar (LAR) data made available in accordance with the Home Mortgage Disclosure Act 

(HMDA). 1994-1997 data from CDs distributed by the Federal Financial Institutions Council. 1998 data obtained 

directly from BankBoston and Fleet. Data include all loans by identifiable aftiliates of lenders named. 

Loan totals have been adjusted, for loans in the city of Boston only, so that only one loan is counted for each 

home purchased under the Soft Second Loan Program In many cases, HMDA data include both the first 

and the (sot?) second mortgage loans originated for these home purchases, This time-consuming adjustment, 

which I believe improves the meaningfulness of the data, results in loan totals lower than those calculated by 

others from raw HMDA data. However, the effects of this adjustment on the percentage changes reported 

in the right hand column of the table above are minor. The total number of duplicate (soft second) 

mortgages eliminated from my database are: 

BankBoston+BayBanks: ‘94 -- 54 loans; ‘95 -- 29 loans; ‘96 -- IO loans; ‘97 -- 7 loans; ‘98 -- no loans 

Fleet+Shawmut: ‘94 -- 135 loans; ‘95 -- 142 loans; ‘96 -- 99 loans; ‘97 -- 91 loans; ‘98 -- 68 loans 

Defined for this study as up to 80% of the median family income in the Boston area. The maximum income to 

qualify as LMI was $41,000 in 1994, f42,OOO in 1995, $45,000 in 1996, and $48,000 in 1997 & 1998. 

Jim Campen, UMassiBoston, June 7, 1999 
Table 3 

MORTGAGE LOANS FOR HOME PURCHASES 

IN SELECTED NORTHEASTERN STATES 

Before and After Recent Fleet Mergers, 1995 - 1997 

I % change 

1995 1996 1997 1995 to 1997 

A. Massachusetts (includes Fleet all years and Shawmut in 1995 & 1996) 

Total Loans 6,080 1 4,548 1 3,016 1 -50.4% 

Loans to Black Borrowers( 702 1 502 1 345 I -50.9% 

Loans to Latin0 Borrowers 536 1 405 1 223 1 -58.4% 

Loans to Low & Mod Income Borrowers1 3.047 I 2.391 1 1.513 I -50.3% 

B. New Jersey (includes Fleet all years, Shawmut in 1995, and NatWest in 1995 & 1996) 

Total Loans! 3,716 1 1,292 1 1,293 1 -65.2% 

Loans to Black Borrowers1 232 1 105 I 100 I -56.9% 

Loans to Latin0 Borrowers 279 1 I14 130 -53.4% 

Loans to Low & Mod Income Borrowers 1,159 I 517 482 -58.4% 

C. New York (includes Fleet all years. Shawmut in 1995, and NatWest in 1995 & 1996) 

I < 

Total Loans 8,059 4,300 2,415 -70.0% 

Loans to Black Borrowers 873 431 227 -74.0% 

Loans to Latin0 Borrowers 467 239 127 -72.8% 

Loans to Low & Mod Income Borrowers 1,646 1,083 603 -63.4% 

D. Connecticut (includes Fleet all years. Shawmut in 1995 & 1996) 

Total Loans 2,391 1,693 1,223 -48.8% 

Loans to Black Borrowers 331 258 125 -62.2% 

Loans to Latin0 Borrowers 293 192 120 -59.0% 

Loans to Low & Mod Income Borrowers 1,016 749 456 -55.1% 

E. New Hampshire (includes Fleet all years, Shawmut in 1995 & 1996) 

Total Loans1 99 I 39 1 31 1 -68.7% 

Loans to Low & Mod Income Borrowers] 35 I I3 I 91 -74.3% 

F. Five State Total (includes Fleet all years, Shawmut & NatWest in 1995 & 1996) 

Total Loans 20,345 11,872 

Loans to Black Borrowers 2,138 1,296 

Loans to Latin0 Borrowers 1,575 950 

Loans to Low & Mod Income Borrowers 6,903 4,753 

7,978 -60.8% 

797 -62.7% 

600 -61.9% 

3,063 -55.6% 

Sources: 

MA: HMDA data analysis by Jim Campen. UMass!Boston (from Table 2) 

NJ, NY, & CT: HMDA data analysis by Research Deparhnent. National Community Reinvestment Coalition, Washington DC 

NH: HMDA data analysis by Granite State Community Reinvestment Association, Condord NH 

&&s: 

Massachusetts data adjusted to eliminate double counting of Soft Second Loans in Boston (see note to Table 2); without this adjustment, my 

numbers for Massachusetts are very close to those calculated by the NCRC. 

Data include loans by all identifiable affiliates of Fleet, NatWest, and Shawmut. 

New Hampshire data are for conventional loans only; data for other states include all home purchase loans. 

Table Prepared by: Jim Campen, UMaw’Boston, June 4, 1999 
Testimony 

of 

Robert R. Davis 

Director of Government 

America’s Community 

on 

Relations 

Bankers 

The Fleet Financial Group, Inc./BankBoston Merger 

before 

The Federal Reserve Bank of Boston 

on 

July 7, 1999 
My name is Robert R. Davis and I am Director of Government Relations for 

America’s Community Bankers. We appreciate the opportunity to present our 

views on the acquisition of BankBoston by Fleet Financial. Your day has been 

long and I promise to be as brief as possible. 

America’s Community Bankers is a national banking trade association 

representing progressive community banks of all sizes. In New England, our 

membership covers. the complete range of institutions other than Fleet and 

BankBoston, consisting of savings banks, co-operative banks, savings associations 

and commercial banks. Our New England members include multi-billion dollar 

regional banks such as Peoples Heritage Bank, Webster Bank and People’s Bank, 

which may be among Fleet’s large-institution competitors in the future. ABC 

membership also includes the smallest institutions in the region, including co-op 

banks with less than $10 million in assets. ACB also represents almost all banks 

that operate as mutual institutions. We are the only national trade group that 

represents the entire spectrum of banks in New England, other than money center 

banks. 

Our testimony will focus on the divestiture of branches, ATMs and other assets 

necessary for the proposed acquisition to comply with antitrust law, as well as 

other competitive considerations. Our concerns can be summarized into five 

points: 

1. 

2. 

3. 

4. 

Community banks in New England are fierce and effective competitors that 

should be afforded a significant role in resolving the anti-trust problems 

inherent in a large acquisition in a concentrated banking market. 

Unlike other regions of the country, savings institutions in New England have 

well-diversified portfolios, and are strong competitors for the business 

customer. 

The unprecedented potential concentration in ATM ownership that could result 

from the proposed acquisition raises economic concerns that must be addressed 

by the regulators’ anti-trust analysis. The divestiture plan being developed 

must take into account the unique economic implications of such a high 

concentration of ATM ownership, particularly within the Route 128 corridor. 

So as not to revisit problems that have emerged in the past, the government 

should provide careful scrutiny of any restrictive real estate covenants that 

would hamper future competition. 
2 

5. Similarly, other contract provisions, such as restrictions on communications 

between potential consortia partners in bidding or restrictions on future hiring 

practices of banks that bid for divested branches, must be prohibited. 

Community Banks As Effective Competitors 

America’s Community Bankers recognizes that the government, as part of its 

consideration of divestitures resulting from acquisitions, has the objective to 

introduce other large competitors into the New England banking scene. We have 

no disagreement with this goal. However, we firmly believe that the most 

competitive banking environment in New England can be created only by also 

enhancing the position of the many community banks. Community banks of all 

sizes are well positioned to assume this role. Each of our members in New 

England -- from the multi-billion dollar institutions, to those of several hundred 

million, to those that are much smaller -- effectively compete in their market niche 

for both the business and the retail customer. 

New England banks have the oldest and strongest tradition in America, and have 

illustrated their competitive mettle by pioneering the move to nation-wide NOW 

accounts almost 20 years ago. These same institutions currently are at the cuttingedge of efforts to bring interest-bearing demand accounts to businesses as well as 

consumers, and will continue to be a driving competitive force in other areas. 

Savings Institutions As Strong Competitors For The Business Customer 

Savings institutions in New England are unique because of the extent of their 

business lending, and current trends indicate that business lending is a rapidly 

growing part of their balance sheets. State-chartered savings banks hold 

approximately 5 percent of their assets in commercial loans, an amount almost as 

great as their consumer loan portfolios. Savings associations, which elsewhere in 

the country frequently are only beginning to engage in business lending, hold over 

four percent of their assets in commercial loans. Even co-op banks, which 

historically have had the strongest mortgage lending orientation among New 

England banks, hold almost 2 percent of their assets in commercial loans, and 

some of the co-ops are quite active commercial lenders. Commercial banks other 

than Fleet and BankBoston hold over 6 percent of their assets as commercial loans. 

Following current trends and aided by an open divestiture process, commercial 

lending by community banks will continue to grow, bringing strong competitive 

benefits to both community and middle market business borrowers. 
ATM Concentration 

New England has the highest concentration of ATM ownership of any region in 

the country, and Massachusetts has the highest concentration of any state. After 

the acquisition, Fleet will control two-thirds of the ATM machines in 

Massachusetts, with a much higher concentration within the Route 128 corridor. 

ATM placement has become a much keener competitive tool in recent years. A 

combination of this trend and the unprecedented potential concentration of 

ownership means that it is essential that ATM concentration assume a central 

position in the current anti-trust analysis. Although Federal Reserve analysis may 

once have relied primarily on Herfindahl-Hirshman indices to measure deposit 

concentration or business loan concentration, today the same rigorous analysis 

must be applied to ATM concentration. 

Restrictive Real Estate Covenants 

Prior merger experiences in the New England area have shown the need for 

divestiture plans also to address covenants which may restrict future uses of 

divested real estate. In particular, restrictions on real estate use and requirements 

for placements of competitor’s ATMs have discouraged entry of effective 

community bank competition into certain markets. We are concerned that this 

remains a problem area that has not been adequately addressed, particularly in 

view of the unique problems associated with ATM concentration. 

Restrictive Contract Provisions 

We are aware that at least two provisions in confidentiality agreements that must 

be signed by bidders may serve to chill the bidding process and diminish the 

competitive role of growing community banks in serving in New England. We 

brought these to the attention of Federal Reserve staff and understand that some 

relief may have been provided. However, we believe these provisions, and 

perhaps others, are serving to hamper community bank bidding for divested 

branches. In particular, the confidentiality agreements require blanket restrictions 

on hiring of Fleet or BankBoston employees under a variety of circumstances. 

Only upon demand has this restriction been partially relaxed. Obviously, 

community banks are hampered in the bidding process if in order to bid they must 

voluntarily agree to give up the right to hire employees that now, in the past or in 

the future might work for the largest bank employer in the region. 
4 

A second restriction limits any bidding company from “discussing with or offering 

to any third party any equity participation in a possible transaction or any other 

form ofjoint acquisition by the receiving party and such third party.” Of course, 

this effectively limits preliminary discussions with possible consortia partners 

without a case-by-case approval by Fleet, which may or may not be granted. 

Although it is my understanding and this contract provision is negotiable, I know 

of no instance when such a negotiation has been successful. 

Conclusion 

America’s Community Bankers has no interest whatsoever in impeding the 

BankBoston acquisition by Fleet. To the contrary, we believe the transaction can 

bring new efficiencies and competition to the marketplace. For that to occur, the 

Federal Reserve and the Department of Justice must carefully construct a 

divestiture plan to resolve anti-trust concerns, and that divestiture plan should take 

into account the points raised above. We strongly believe that the acquisition and 

divestitures in question can result in gains for the entire banking industry and all of 

its customers in New England. We are just as strongly convinced that the best 

solution will be a divestiture that ensures a strong role for competitive community 

banking throughout the region. 
Statement of Donald S. Glass 

President, Community Bank League of New England 

Boston, Massachusetts 

Federal Reserve Board Public Meeting 

July 7, 3999 

Re: Merger of Fleet Financial Group and BankBoston Corporation 

Good morning. For the record my name is Donald Glass. 1 am the President of the 

Community Bank League of New England, a regional trade association representing 118 

community banks located throughout the six New England states. Our members range in size 

from $9 million to $1.2 billion with an average asset size of $147 million. 

We believe that generally this merger will have a very positive impact on the economic 

vitality of the New England region. It is good for the two companies and the region as a whole. 

We advocate a win-win scenario where community banks, small businesses, local communities 

and consumers win as well, as a consequence of this transaction. 

Community banks are a vital source for financial services to small businesses, local 

communities, and consumers. Community banks strive to provide quality products and 

services at affordable prices while demonstrating a strong commitment to and investment in 

their local communities. A key principle in the League’s mission statement is to foster an 

environment in which community banks can operate in a productive, profitable manner. In line 

with our mission, we believe it is essential and in the best interest of the banking industry as a 

whole that this proposed transaction be conducted in a way that allows community banks to 

play a role in the completion of this merger. 

We have three key concerns regarding the proposed merger between Fleet Financial 

Group and BankBoston Corp. They are as follows: 

1. There are a number of anti-trust issues such as overall market dominance, state 

imposed deposit caps as well as the concentration of ATM ownership. The latter is 

of primary concern to our members, since together Fleet and BankBoston own the 

largest number of bank-owned ATM machines in use today in Massachusetts. In the 

metropolitan Boston area their combined ATM ownership is well over 50 percent. 

This gives them the ability to employ predatory pricing practices, such as 

surcharging. We strongly urge that these anti-trust concerns be thoroughly 

evaluated and that serious consideration be given to requiring the divestiture of a 

specific percentage of ATM machines both those located in branches and freestanding alike. 
2. In the past, large banks in this region have included non-compete clauses in sale and 

other documents relating to the divestiture of bank branches and real estate. In this 

regard, we would urge you to make sure that this practice is prohibited. 

3. We believe that community banks should be allowed to have the opportunity to 

participate in the purchase of deposits and branches to be divested. Their 

participation in the divestiture process will help ensure that the community banking 

industry remains a strong and vibrant player serving local communities in their 

respective markets. 

Thank you for considering our views,