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	<title> - BANKS, MERGERS, AND THE AFFECTED COMMUNITIES</title>
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	[House Hearing, 108 Congress]
	[From the U.S. Government Publishing Office]





	BANKS, MERGERS, AND THE AFFECTED COMMUNITIES

	=======================================================================

	FIELD HEARING

	BEFORE THE

	COMMITTEE ON FINANCIAL SERVICES

	U.S. HOUSE OF REPRESENTATIVES

	ONE HUNDRED EIGHTH CONGRESS

	SECOND SESSION

	__________

	DECEMBER 14, 2004

	__________

	Printed for the use of the Committee on Financial Services

	Serial No. 108-117



	U.S. GOVERNMENT PRINTING OFFICE
	20-952 WASHINGTON : 2005
	_____________________________________________________________________________
	For Sale by the Superintendent of Documents, U.S. Government Printing Office
	Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; (202) 512�091800
	Fax: (202) 512�092250 Mail: Stop SSOP, Washington, DC 20402�090001

	HOUSE COMMITTEE ON FINANCIAL SERVICES

	MICHAEL G. OXLEY, Ohio, Chairman

	JAMES A. LEACH, Iowa BARNEY FRANK, Massachusetts
	RICHARD H. BAKER, Louisiana PAUL E. KANJORSKI, Pennsylvania
	SPENCER BACHUS, Alabama MAXINE WATERS, California
	MICHAEL N. CASTLE, Delaware CAROLYN B. MALONEY, New York
	PETER T. KING, New York LUIS V. GUTIERREZ, Illinois
	EDWARD R. ROYCE, California NYDIA M. VELAZQUEZ, New York
	FRANK D. LUCAS, Oklahoma MELVIN L. WATT, North Carolina
	ROBERT W. NEY, Ohio GARY L. ACKERMAN, New York
	SUE W. KELLY, New York, Vice Chair DARLENE HOOLEY, Oregon
	RON PAUL, Texas JULIA CARSON, Indiana
	PAUL E. GILLMOR, Ohio BRAD SHERMAN, California
	JIM RYUN, Kansas GREGORY W. MEEKS, New York
	STEVEN C. LaTOURETTE, Ohio BARBARA LEE, California
	DONALD A. MANZULLO, Illinois JAY INSLEE, Washington
	WALTER B. JONES, Jr., North DENNIS MOORE, Kansas
	Carolina MICHAEL E. CAPUANO, Massachusetts
	DOUG OSE, California HAROLD E. FORD, Jr., Tennessee
	JUDY BIGGERT, Illinois RUBEN HINOJOSA, Texas
	MARK GREEN, Wisconsin KEN LUCAS, Kentucky
	PATRICK J. TOOMEY, Pennsylvania JOSEPH CROWLEY, New York
	CHRISTOPHER SHAYS, Connecticut WM. LACY CLAY, Missouri
	JOHN B. SHADEGG, Arizona STEVE ISRAEL, New York
	VITO FOSSELLA, New York MIKE ROSS, Arkansas
	GARY G. MILLER, California CAROLYN McCARTHY, New York
	MELISSA A. HART, Pennsylvania JOE BACA, California
	SHELLEY MOORE CAPITO, West Virginia JIM MATHESON, Utah
	PATRICK J. TIBERI, Ohio STEPHEN F. LYNCH, Massachusetts
	MARK R. KENNEDY, Minnesota BRAD MILLER, North Carolina
	TOM FEENEY, Florida RAHM EMANUEL, Illinois
	JEB HENSARLING, Texas DAVID SCOTT, Georgia
	SCOTT GARRETT, New Jersey ARTUR DAVIS, Alabama
	TIM MURPHY, Pennsylvania CHRIS BELL, Texas
	GINNY BROWN-WAITE, Florida
	J. GRESHAM BARRETT, South Carolina BERNARD SANDERS, Vermont
	KATHERINE HARRIS, Florida
	RICK RENZI, Arizona
	JIM GERLACH, Pennsylvania

	Robert U. Foster, III, Staff Director


	C O N T E N T S

	----------
	Page
	Hearing held on:
	December 14, 2004............................................ 1
	Appendix:
	December 14, 2004............................................ 75

	WITNESSES
	Tuesday, December 14, 2004

	Antonakes, Hon. Steven L., Commissioner of Banks, Commonwealth of
	Massachusetts.................................................. 62
	Baldwin, Irene, Executive Director, Association for Neighborhood
	and Housing Development........................................ 11
	Campanelli, Joseph P., President and Chief Operating Officer,
	Sovereign Bank New England Division and Vice Chairman of
	Sovereign Bankcorp, Inc........................................ 37
	Cofield, Juan, President, New England Area Conference of NAACP... 8
	Finucane, Anne, President, Northeast Bank of America Corporation. 34
	Flynn, Maureen, Deputy Director, Massachusetts Association of
	Community Development Corporations, Inc........................ 4
	Hagins, Florence, Assistant Director, Massachusetts Affordable
	Housing Alliance............................................... 6
	Nuciforo, Hon. Andrea F. Jr., Senator, Massachusetts State House. 60
	Quinn, Hon. John F., Representative, Massachusetts State House... 57
	Thall, Mathew, Senior Program Director, Local Initiatives Support
	Corporation.................................................... 13

	APPENDIX

	Prepared statements:
	Bachus, Hon. Spencer......................................... 76
	Lynch, Hon. Stephen F........................................ 79
	Murphy, Hon. Tim............................................. 81
	Antonakes, Hon. Steven L..................................... 82
	Baldwin, Irene............................................... 91
	Campanelli, Joseph P......................................... 110
	Cofield, Juan................................................ 270
	Finucane, Anne............................................... 277
	Flynn, Maureen............................................... 288
	Hagins, Florence............................................. 307
	Nuciforo, Hon. Andrea F. Jr.................................. 311
	Quinn, Hon. John F........................................... 321
	Thall, Mathew................................................ 328

	Additional Material Submitted for the Record

	Frank, Hon. Barney:
	Written questions submitted for December 14, 2004 Boston
	Field Hearing.............................................. 333
	Responses to questions from Hon. Barney Frank................ 335
	Watt, Hon. Melvin L.:
	``Lending wisdom,'' The Boston Globe, January 20, 2004....... 339
	``Bank of America to add 300 jobs,'' The Boston Globe,
	December 11, 2004.......................................... 340
	``Bill Tightens Bank Merger Rules in State,'' The Boston
	Globe, December 4, 2004.................................... 342
	``Mergers Pinching Smaller Nonprofits,'' The Boston Globe,
	November 21, 2004.......................................... 344
	``Bank of America to Cut More Jobs; Firm: Most Trims Will
	Come From Outside The State,'' The Boston Globe, October 8,
	2004....................................................... 347
	``Hold Bank Accountable,'' The Boston Globe, September 1,
	2004....................................................... 349
	``Bye-Bye Big Bank, A Look At San Francisco Without Bank of
	America's Headquarters Suggest Boston's Future Without
	Fleetboston Isn't Easy to Predict,'' The Boston Globe,
	February 1, 2004........................................... 351
	Nuciforo, Hon. Andrea F. Jr.:
	Southcoast Workforce Development Update, prepared statement.. 354
	Inner City Press/Community on the Move & Fair Finance Watch,
	prepared statement............................................. 371


	BANKS, MERGERS, AND THE AFFECTED COMMUNITIES

	----------


	Tuesday, December 14, 2004

	U.S. House of Representatives,
	Committee on Financial Services
	Washington, D.C.
	The committee met, pursuant to call, at 10:12 a.m., at the
	Federal Reserve Bank of Boston, 600 Atlantic Avenue, Boston,
	Massachusetts, Hon. Spencer Bachus [presiding.]
	Present: Representatives Bachus, Murphy, Frank, Watt,
	Meeks, Lee, Capuano, Lynch. Also present was Representative
	Tierney.
	Chairman Bachus. Good morning. The Committee on Financial
	Services will come to order.
	Today is a full Committee hearing requested by Mr. Barney
	Frank, Senior Ranking Member of the Committee, to examine the
	economic impact of large bank mergers, with particular focus on
	the two mergers we've had here in the Northeast. Gramm-Leach-
	Bliley have other factors contributed to me a large number of
	bank mergers we have seen recently.
	Since the mid-'40s, there's been a decline of about 40
	percent in the number of banking organizations; and the ten
	largest U.S. banking organizations, they've increased their
	deposit share or bank asset share from 20 percent to 46 percent
	by the end of last year. So there has been a tremendous
	consolidation in the industry.
	In fact, three of our banks, Bank of America, who will have
	a witness testify today, along with JPMorgan Chase and
	Citibank, are actually bumping up against the 10 percent
	deposit limit of Riegle-Neal.
	We're going to shorten our time for opening statements
	because we have three panels. Our first panel will be consumer
	advocates and public-interest advocates; our second panel will
	be representatives of the banks involved. We will have
	representatives from Bank of America and also from Sovereign
	Bank; and our third panel will have a state senator, state
	representative and a banking commissioner from the State of
	Massachusetts.
	Because we do want to get right to our witnesses, we're
	going to constrict our opening statements. I'll submit my
	entire opening statement for the record.
	I would note that Bank of America and Fleet Boston did
	announce that they were stepping up their CRA commitments over
	a ten-year period as a result of the merger, and I'm sure there
	will be testimony on that and how that's going.
	[The following information can be found on page 333 in the
	appendix.]
	Chairman Bachus. With that, Mr. Frank?
	Mr. Frank. Thank you, Mr. Chairman. I want to express my
	very deep personal appreciation. We often say that, but on
	occasion we really mean it; and this is one of them.
	To the chairman of the full Committee, Mike Oxley, and to
	my colleague, Spencer Bachus, it is a refutation of the notion
	that partisanship has totally seized control of Congress that
	the Republicans, who are in the majority, agreed to this
	important hearing.
	I am deeply appreciative to Chairman Oxley and his staff
	for this, to my two colleagues, Spencer Bachus and Tim Murphy,
	who at some inconvenience to themselves, at a time when frankly
	our workload is not supposed to be the highest, agreed to come
	here.
	I want to express my appreciation also to other of my
	colleagues who joined us from elsewhere: Congressman Watt from
	North Carolina, Congresswoman Lee from California, Congressman
	Meeks from New York, as well as my Massachusetts colleagues who
	have joined us.
	This is a very important issue, both specifically and
	generally. Obviously the impact of the Bank of America purchase
	of Fleet is of great significance to Massachusetts, and indeed
	to the rest of New England; but this is also symptomatic of a
	national set of issues. And this is not a hearing only about
	Bank of America; we will be hearing from one witness who has
	had dealings with JPMorgan Chase, which was mentioned by the
	chairman. These are not personal issues; there are very
	significant public policy issues here.
	I just want to add one thing. One of the concerns that I'm
	sometimes asked to address is, well, what business is it of you
	and other elected officials to dictate or put pressure on a
	private institution? How do you come to feel that you can tell
	a bank, well, you've hired too few people or you haven't done
	enough in this lending area.
	The answer is, in part, that banks are a very important
	part of our free market system, and they perform an essential
	role. I think virtually every one of us on this panel has
	cooperated with the banks in things like allowing them to
	truncate checks, and we've tried to reform deposit insurance.
	We are very much interested in a better functioning of the
	banking system in the interest of the economy as a whole, but
	let's also be clear: Banks have deposit insurance guaranteed by
	the federal government. They have access to the discount window
	in the Federal Reserve system. Banks are protected against
	competition by the restrictions on entry. In other words, banks
	are a very important part of our system, and they receive a
	great deal of protection and assistance from the government.
	In return, Congress passed and the President signed the
	Community Reinvestment Act which imposes certain reciprocal
	restrictions; so when we discuss these things, it's in that
	context. It does not mean that we don't recognize that banks
	are essential to the functioning of our free market economy. It
	is that we recognize also that, given the advantages that we
	give banks so that they can perform that function, it is
	important that there be something in return.
	I appreciate that, Mr. Chairman, and I thank you for
	holding this important hearing.
	Chairman Bachus. Thank you, Mr. Frank.
	Chairman Bachus. Mr. Watt?
	Mr. Watt. Thank you, Mr. Chairman.
	We actually agreed not to make opening statements in the
	interest of time to get some witnesses who have some time
	problems to not just sit here and listen to all of us, but I
	asked them to give me one minute to make two disclosures, just
	in the interest of full disclosure.
	First of all, one of the institutions that's represented
	here is based in my Congressional district, and that's Bank of
	America. So I wanted to welcome them, although I don't have the
	right to be welcoming anybody to Boston; but at least so that
	everybody would know that the home base of Bank of America is
	actually physically located in my Congressional district.
	The second disclosure is that Juan Cofield, one of the
	witnesses on the first panel, who's over the NAACP branches
	here in this area, and I were classmates at the University of
	North Carolina. We in fact, between me, Juan, and James, his
	brother, represented one-fourth of the African-Americans in a
	class of over two thousand students when we started
	undergraduate school; and when we finished, we probably
	represented about one-half of the people in that class, because
	through attrition, some of them had gone and done other things.
	So we go back a long way, and I want to welcome him and
	thank him for being here personally. Thank you very much.
	Chairman Bachus. Thank you, Mr. Watt.
	Chairman Bachus. I'd also note for the record that
	Charlotte also is about the second largest bank in my home
	town.
	Mr. Frank. Mr. Chairman, one last thing while we're
	acknowledging home towns. I think we should note that we are in
	the district of my colleague, Mr. Lynch; so our home
	Congressman is also here.
	Chairman Bachus. You might want to introduce the other
	Members of the Massachusetts delegation.
	Mr. Frank. Yes. We're joined by our Congressman John
	Tierney, from north of here, who is not a Member of the
	Committee, and we particularly appreciate his taking the time
	to be here; Congressman Lynch, who is a Member of the
	Committee; and Congressman Capuano, whose district is about a
	block away.
	Mr. Capuano. Across the street.
	Mr. Frank. Across the street. I'm delighted to have my
	colleagues here.
	We have Congressman Meeks from New York; Congresswoman Lee
	from California, who also has a claim of former host, because
	the Bank of America name came from the Bank of America which
	was originally in the Bay Area. So Congresswoman Lee from
	Oakland has a piece of that claim.
	Chairman Bachus. We also have Mr. Murphy, who's from
	Pennsylvania; and Sovereign Bank is in your district.
	Mr. Murphy. Mellon.
	Chairman Bachus. Now that we've had those exciting opening
	statements, we'll turn to our first panelist, Ms. Maureen
	Flynn, deputy director of the Massachusetts Association of
	Community Development Corporations; Ms. Florence Hagins,
	director of Massachusetts Affordable Housing Alliance; Mr.
	Cofield, who has already been introduced. Juan Cofield?
	Mr. Cofield. Right.
	Chairman Bachus. New England Area Conference of NAACP; Ms.
	Irene Baldwin, executive director of the Association for
	Neighborhood and Housing Development; and Mr. Mathew Thall,
	senior program director of Local Initiative Support
	Corporation.
	So we welcome you all, and at this time we will start with
	Ms. Flynn and hear your opening statement. Then we will go to
	Ms. Hagins and down the line.

	STATEMENT OF MAUREEN FLYNN, DEPUTY DIRECTOR, MASSACHUSETTS
	ASSOCIATION OF COMMUNITY DEVELOPMENT CORPORATIONS, INC.

	Ms. Flynn. Thank you, Chairman Bachus, Congressman Frank
	and Members of the Committee, especially the Massachusetts
	delegation, for being here today. We appreciate your holding a
	field hearing in Massachusetts on the recent mergers.
	Before I start, I wanted to make clear that my testimony
	today includes the comments and the input of two other members
	of our statewide coalition on CRA issues, which is the Fair
	Housing Center of Greater Boston and the Lawyers' Committee for
	Civil Rights. They cannot testify today, but my comments
	include their comments.
	I will address my comments in the order of the questions
	that were asked to us as a panel, and I have submitted written
	testimony; so this is a summary of what I've said in my written
	testimony.
	First, regarding job loss: As a group that represents low-
	and moderate-income communities across Massachusetts, we are
	most disturbed by the job losses sustained by southeastern
	Massachusetts because of the most recent Sovereign acquisition
	of Seacoast Bank. The merger resulted in the elimination of 350
	jobs in southeastern Massachusetts.
	The recent Bank of America acquisition of Fleet Bank
	resulted in the loss of key bank positions and employees who
	were able to make a positive connection between Fleet Bank and
	the communities that they serve. In addition, Bank of America
	has effectively reduced its CRA staff, so that there is just
	one CRA officer now for two states, Massachusetts and Rhode
	Island.
	Secondly, regarding the extent to which acquiring banks
	have entered into commitments during the merger process: On
	December 1, 2004, Sovereign Bank signed a new five-year
	community investment agreement. The details of that agreement
	are included in my written testimony.
	The agreement, in essence, contains all of the provisions
	which the community coalition that worked with them on the
	agreement requested, most importantly, commitments to
	affordable housing, small business lending, a Massachusetts
	advisory council and goals on diversity in hiring and awarding
	contracts.
	Could Sovereign do more to mitigate the effects of its
	acquisition of Seacoast Bank, especially for southeastern
	Massachusetts? Absolutely. Does the agreement contain a plan
	for mitigating the effects of job loss? No.
	Our work is not finished on the merger, and neither is
	theirs. We intend to work with them through the framework of
	this agreement and through the advisory council so that
	Sovereign Bank becomes a true partner and leader in
	southeastern Massachusetts. The fact that we have an agreement
	with them and an advisory council makes that continuing work
	possible.
	As for Bank of America, in November of 2003, just after
	Fleet Bank announced that they were accepting an acquisition
	proposal by Bank of America, our community coalition proposed a
	Massachusetts-specific community investment plan to the bank
	based on what we understood are the community credit needs of
	our state. This proposal contained almost identical categories
	as those contained in previous Sovereign agreements and
	Citizens Bank agreements.
	In February, after several meetings and intense discussions
	with Fleet Bank and Bank of America officials, the bank agreed,
	in writing, to a written Massachusetts plan. In the first few
	months of this year, Bank of America agreed to make several
	commitments on areas contained in our proposal, which I have
	again outlined in my written testimony.
	We very much appreciate Bank of America's commitments to
	date and think the commitments are a good first step in
	partnering with Massachusetts communities. However, more than
	one year after Bank of America announced their plan to acquire
	Fleet, there are four extremely important outstanding issues on
	which Bank of America has not yet agreed to make commitments or
	set goals: Small business lending goals by loan type and area,
	goals for diversity in hiring, goals for diversity in awarding
	contracts, and the establishment of a formal Massachusetts
	community bank advisory council.
	Without these goals set, Bank of America's promise to us
	hasn't been met. Without these goals set, there can be no
	written community investment agreement or plan with Bank of
	America that adequately attempts to serve the credit needs of
	the citizens of Massachusetts.
	The information that Bank of America released to us this
	past Friday regarding their Massachusetts business strategy is
	not a plan for addressing the credit needs of low- and
	moderate-income individuals in Massachusetts; and in fact, the
	words ``low- and moderate-income'' only appear once, in the
	last sentence of the last paragraph of the last page of the
	document.
	The information gives us a general idea about how the bank
	will conduct its business. What we want to know is how they
	plan to meet the credit needs of low- and moderate- income
	individuals and communities based on the categories set out in
	the CRA regulations. It's that simple.
	As we mentioned, we appreciate the commitments that the
	bank has made to Massachusetts so far. However, Sovereign Bank
	and Citizens have been able to meet the standard established by
	our state in terms of being parties to solid community
	investment agreements. We only ask that Bank of America meet
	that standard as well, or even, as their advertising campaign
	suggests, that they try to achieve a higher standard reflective
	of their preeminent ranking in the financial services industry.
	Lastly, regarding whether current laws provide sufficient
	criteria for the review of the impact of bank mergers on
	communities, we feel that they do not, and they are inadequate
	to ensure communities' interests post-merger.
	First, CRA regulations should include an assessment of how
	well banks have met the credit needs of communities of color.
	Second, there are two inadequacies in the Bank Holding
	Company Act which require that in determining whether to
	approve an acquisition application, bank regulators must assess
	whether the merging banks have complied with the CRA law in
	meeting the credit needs of a community.
	The assessment under the law requires that the regulators
	only look to the past record of the two merging banks on CRA
	issues, not how they are going to meet CRA in the future after
	they have merged.
	Secondly, there is no requirement that the regulators
	compare the performance after the banks have merged on whether
	they have met the requirements under the law under CRA and the
	Bank Holding Company Act; and therefore, there's no incentive
	for banks to take into account any diminishing of services,
	investment or lending post-merger.
	So again, we thank the Committee very much for allowing us
	to submit testimony on these very important issues and for your
	coming to Massachusetts to hear us on these issues.
	Chairman Bachus. Thank you.
	[The prepared statement of Maureen Flynn can be found on
	page 288 in the appendix.]
	Chairman Bachus. Ms. Hagins?

	STATEMENT OF FLORENCE HAGINS, ASSISTANT DIRECTOR, MASSACHUSETTS
	AFFORDABLE HOUSING ALLIANCE

	Ms. Hagins. Thank you for the opportunity to testify today,
	Chairman Bachus, Congressman Frank, and other Members of the
	Committee. We appreciate the willingness of the Committee to
	come to Boston for this field hearing. We particularly thank
	Congressman Frank for his strong support for the CRA and his
	successful efforts to encourage banks to make specific
	commitments to the community they serve.
	My name is Florence Hagins, and I am the assistant director
	of the Massachusetts Affordable Housing Alliance. MAHA is a
	non-profit organization that works to increase public and
	private sector investment in affordable housing and to break
	down the barriers facing first-time home buyers.
	We have signed multi-year CRA agreements with most major
	banks in the state detailing commitments to the SoftSecond
	program, which is the state's most affordable mortgage project,
	and has helped over 7,700 low- and moderate-income home buyers
	buy their first home. As the leading anti-redlining program in
	Massachusetts, we have also worked closely with groups such as
	the Mass. Association of CDCs, Fair Housing Center of Greater
	Boston, and Lawyers' Committee for Civil Rights.
	On January 13, 2004, Bank of America signed an agreement
	with MAHA for 3,000 SoftSecond loans in Massachusetts over the
	next ten years. In addition, Bank of America made public
	commitments to other housing programs. They agreed to remain a
	member of the Federal Home Loan Bank of Boston. They agreed to
	remain fully invested in the Massachusetts Housing Investment
	Corporation.
	Bank of America agreed to convert a portion of its loan
	commitment to the Massachusetts Housing Partnership to an $18
	million grant; and Bank of America agreed to participate in the
	Massachusetts Basic Banking program by offering low-cost
	checking and savings accounts.
	On housing, Bank of America has made the right commitments.
	Bank of America has a chance, as they enter this market, to be
	the lender of choice for low- and moderate-income residents in
	Massachusetts, but it will take an aggressive commitment to
	better serve these markets.
	Bank of America needs to hire more loan originators from
	diverse backgrounds; increase its marketing in low- and
	moderate-income neighborhoods; and provide good and timely
	customer service throughout the mortgage process.
	We have had discussions with Anne Finucane of Bank of
	America, and we are in agreement that staffing levels for loan
	originators need to be significantly increased in the Boston
	market. We appreciate the commitment that Bank of America has
	made to increase its staffing levels in the mortgage area.
	Chairman Bachus. Ms. Hagins, we're told that people in the
	back of the room can't hear; so I'm going to ask the panelists
	to pull the mike a little closer to you.
	Mr. Frank. Put it right in front of your mouth.
	Ms. Hagins.In addition, Bank of America senior management
	will need to emphasize the importance of increased production
	in the SoftSecond program.
	In the first eleven months, we have seen mixed results
	under the Bank of America SoftSecond agreement. Bank of America
	has exceeded its commitment of 150 loans outside of the city of
	Boston by closing 165 mortgages, making them the number one
	lender in the program statewide.
	In Boston, however, the numbers tell a far different story.
	Bank of America has closed 52 loans in the city of Boston
	against the commitment of 100 loans, making them only the third
	largest SoftSecond lender in the city of Boston.
	MAHA has also reached agreement with Sovereign Bank prior
	to its merger with Seacoast for commitments to the SoftSecond
	loan program. Sovereign has committed to a total of 575
	SoftSecond loans during the next three years.
	In 2004, Sovereign's commitment is for 75 loans in Boston
	and 100 outside of Boston. Through November 2004, they have
	closed 144 loans throughout the state, which makes them the
	second largest SoftSecond lender in Massachusetts. During the
	merger process, Sovereign officials were also willing to make
	specific commitments to New Bedford and the south coast region
	of Massachusetts.
	We offer the following comments on the adequacy of the CRA.
	One weakness of CRA, or at least as it is enforced by
	federal regulators, is that banks are not compelled to enter
	into signed written agreements with community groups. Many
	choose instead to make public commitments which do not include
	much in the way of detail.
	Any other serious relationship between a bank and its
	customers, partners and vendors is typically in the form of a
	written agreement. CRA commitments should be no different.
	CRA is a law that needs to be expanded to cover mortgage
	companies as well as banks. In Boston in 1990, banks controlled
	by CRA controlled 78 percent of the mortgage lending market.
	Last year, the bank market share percentage had slipped to 23
	percent. Yet banks covered by CRA lend to lower-income and
	minority borrowers at a rate more than double that of largely
	non-CRA-covered mortgage companies.
	We oppose the move by the Office of Thrift Supervision and
	the FDIC to raise the small-bank threshold from $250 million to
	$1 billion, allowing many banks to eliminate the investment and
	service components of the three-pronged CRA test.
	We support expanding CRA to include disclosure of race
	information on small business loan data and to specifically
	include areas such as diversity in employment and procurement
	for minority- and women-owned business enterprises.
	We thank you for the opportunity to testify today and we
	would be happy to answer any questions.
	Chairman Bachus. Thank you.
	[The prepared statement of Florence Hagins can be found on
	page 307 in the appendix.]
	Chairman Bachus. Mr. Cofield?

	STATEMENT OF JUAN M. COFIELD, PRESIDENT, NEW ENGLAND AREA
	CONFERENCE OF NAACP

	Mr. Cofield. Good morning. I'm Juan Cofield, president of
	the New England Area Conference of the NAACP. The acronym for
	the New England Area Conference is NEAC and you will hear me
	referring to NEAC.
	NEAC is the coordinating and governing body for the
	branches of the NAACP in the states of Rhode Island,
	Massachusetts, New Hampshire, Maine and Vermont. I want to
	express my sincere appreciation to Chairman Bachus, Ranking
	Minority Member Congressman Frank, and the other Committee
	Members for conducting this hearing here in Boston today. This
	hearing, in and of itself, has already had an impact on the
	delivery of banking services in this community.
	NEAC is part of a loose coalition of non-profit
	organizations called the Community Advisory Committee, the
	acronym being CAC, formed to advocate for people of color and
	low- and moderate-income people in pursuit of improved banking
	services.
	In general, my testimony is supported by the CAC. More
	specifically, I wish to indicate that the general thrust of my
	testimony has the support of the Lawyers' Committee for Civil
	Rights Under Law of the Boston Bar Association and the Fair
	Housing Center of Greater Boston.
	To put my testimony in context, I would like to provide for
	you the vision and mission of the NAACP. The vision of the
	NAACP is to ensure a society in which all individuals have
	equal rights and there is no racial hatred or racial
	discrimination. The mission of the NAACP is to ensure the
	political, educational, social and economic equality of all
	persons and to eliminate racial hatred and racial
	discrimination.
	NEAC and the CAC requested two commitments from Bank of
	America which relate to the bank's employment at all levels of
	people of color and women and the procurement of goods and
	services from businesses owned by people of color and women.
	Statistical data will clearly show that the percentage of
	people of color and women employed by Bank of America at all
	levels, nationally and in Massachusetts, is not matched by
	these categories of citizens' percentage of the population. An
	even worse disparity is reflected regarding the percentage of
	goods and services purchased from people of color and women.
	NEAC and the coalition have requested that Bank of America
	set a goal and develop a plan such that the bank's employment
	at all levels again of people of color reflect the percentage
	of people of color in the general population in the
	Commonwealth of Massachusetts. A similar request has been made
	regarding the bank's procurement of goods and services.
	These disparities are certainly not unique to Massachusetts
	and Bank of America alone did not create the disparity in
	Massachusetts or in our great nation. It is a problem of our
	American society and economy.
	However, Bank of America must be part of the solution. The
	lack of employment and business opportunities has contributed
	to economic destabilization in communities with a dominant
	population of people of color.
	The Community Reinvestment Act begins by reciting
	Congress's three findings in passing the law. First, banks are
	required to serve the convenience and needs of the communities
	in which they are chartered to serve. Economic stabilization is
	a dire need in many communities of color. Adequate employment
	and business opportunities will greatly contribute to
	stabilizing these communities.
	Since Bank of America in its normal course of business
	provides employment opportunities and opportunities for
	businesses to sell the bank goods and services, NEAC and the
	CAC maintain that the bank has an affirmative obligation under
	the CRA to provide these same opportunities on an equal basis
	to communities with dominant populations of people of color.
	I aver that further evidence of Bank of America's
	affirmative obligation to provide employment and business
	opportunities is found in the investment test of the CRA
	regulations for large banks. The investment test evaluates the
	bank's community development investments. Of the four measures
	of a bank's investment, two are directly relevant: the bank's
	responsiveness to community development needs and the degree to
	which investments are not provided by other private investors.
	Bank of America can present no reasonable argument that
	providing equal access to jobs and business opportunities in
	destabilized communities with a dominant population of people
	of color is not addressing a community need. Further, these
	investments are not being sufficiently provided by other
	private investors. NEAC and the coalition have sought a
	reasonable investment plan of employment and business
	opportunities from the bank to address these stark community
	needs.
	To this point, Bank of America has not presented NEAC and
	the coalition with such a plan. Up to Thursday morning,
	December 9, discussions with the bank had been quite
	disappointing, to say the least. But on Thursday morning, I had
	a lengthy discussion with two senior bank officials: Doug
	Woodruff, president of CD Banking, Bank of America, and William
	Fenton, senior vice-president of Bank of America here in
	Boston. I am more hopeful today, as a result of that
	conversation, than I was prior to last Thursday, December 9.
	The bank's attitude has been that it is developing a
	national plan and that Massachusetts will fit within that plan.
	It is a one-size-fits-all approach. However, this approach, in
	my humble and lay opinion, is not what the CRA intended to
	require.
	CRA is the acronym for Community Reinvestment Act and not
	the Country Reinvestment Act. Any plan developed by the bank
	should be specific and tailored to the needs of the communities
	which each of you, our most honorable Congressmen, represent if
	the bank is providing banking services in your district.
	By contrast, I would like to point out what Bank of
	America's two largest competitors in Massachusetts are doing.
	Sovereign Bank of New England and Citizens Bank
	Massachusetts have made a commitment and are developing plans
	for their respective banks' employment at all levels and
	procurement programs of goods and services, which reflect the
	diversity of the Commonwealth of Massachusetts.
	These banks did not simply say, ``Come in and let us show
	you what we plan to do.'' These commitments were the result of
	an openness of attitude, a willingness to provide the best
	service to the communities which they serve, and an extended
	period of negotiations.
	I know that each of these banks is proud of their
	commitments. They feel that implementation of the commitments
	will enhance their ability to serve the community.
	Additionally, they believe that implementation of these
	commitments will grow their revenue and profits.
	In particular, and because you are reviewing Sovereign
	Bank's acquisition of Seacoast Banks, I want to take this
	opportunity to publicly state, on behalf of the New England
	Area Conference of the NAACP and the other organizations whose
	views are reflected in this testimony, that Sovereign Bank New
	England has distinguished itself in developing a relationship
	with the Community Advisory Committee.
	The bank recently signed a comprehensive agreement with the
	CAC which includes definitive language on workforce and
	procurement diversity to reflect the ethnic and gender
	diversity of the Commonwealth of Massachusetts. The bank, I
	believe, is a prime example of a bank attempting to serve the
	totality of needs of the community. The leadership of the bank,
	of the Sovereign Bank of New England gets it.
	I do urge you, the Financial Services Committee of the
	House of Representatives, to move forward to strengthen the CRA
	in three important aspects.
	One aspect is to ensure that major nationwide banks develop
	and implement plans that truly serve the totality of needs of
	the communities they serve. The communities that you represent
	will be the beneficiaries of such legislation.
	Secondly, I would ask that you take action to provide
	specific language in the CRA to address the issue of ethnic and
	gender diversity. The issue of race continues as a serious
	problem in our nation. It is not too much to ask that a bank,
	in its normal course of business, be a part of the solution and
	not a part of the problem. The interest of our nation will
	certainly be enhanced.
	Exactly eleven months ago today, I addressed the Federal
	Reserve Bank of Boston at its public hearing regarding the
	acquisition of Fleet Boston by Bank of America. At that
	hearing, I urged the Federal Reserve to defer a decision on the
	Bank of America's application for approval of the acquisition
	until such time that a definitive plan was presented addressing
	the full range of community needs. I continue to believe that
	such action would have been the proper course and the proper
	decision of the Federal Reserve Bank.
	So third, I request that you strengthen the language of the
	CRA to provide for such a plan prospectively.
	In closing, I am honored and, again, I do appreciate the
	opportunity to address the Committee on this important affect
	of your work. Thank you very much.
	Chairman Bachus. Thank you.
	[The prepared statement of Juan Cofield can be found on
	page 270 in the appendix.]
	Chairman Bachus. Ms. Baldwin.

	STATEMENT OF IRENE BALDWIN, EXECUTIVE DIRECTOR, ASSOCIATION FOR
	NEIGHBORHOOD AND HOUSING DEVELOPMENT

	Ms. Baldwin. Good morning, Chairman Bachus, Congressman
	Frank, and other Members of Congress. I'm the executive
	director of the Association For Neighborhood and Housing
	Development.
	We're based in New York City and we're a coalition of 93
	non-profit neighborhood housing groups. Our member
	organizations work in low- and moderate-income neighborhoods
	around the city, and they work extensively with almost all the
	area banks on a range of community development initiatives.
	My testimony today will focus on the JPMorgan Chase merger,
	the community development commitments the bank made at the time
	of that merger, and how they've been implemented over time.
	At the time of its purchase of JPMorgan in 2000, Chase was
	considered a leader in community development in New York City.
	They were probably the dominant bank in New York City in
	community development lending and investment. JPMorgan was also
	very prominent in community development, and both banks were
	very well respected by our member organizations.
	We were very concerned about the JPMorgan Chase merger. We
	couldn't afford to lose the activities or programs of either
	bank, and we thought there was a very good chance that might
	happen out of the merger, particularly in the case of JPMorgan,
	which was the bank that was being picked up by Chase.
	So we met with leadership of Chase during the time of that
	merger, we met with a vice-chairman for the retail bank, two
	executive vice-presidents, several other Chase staff, and about
	a dozen community group representatives.
	At that meeting, the bank made a number of commitments.
	These are discussed in some detail in my written statement, but
	essentially the bank promised to keep doing what it had been
	doing in the two separate banks. We weren't asking for an
	expanded commitment; we were just asking that they not roll
	back or pull back from what they were already doing.
	The main promises they had made to us were that all of the
	banks' community development programs would be coordinated and
	delivered through Chase's centralized community development
	group. We felt the community development group was very strong,
	and we wanted to make sure it survived the merger.
	They also promised that the staff and programs of Morgan's
	CDC would be preserved; and further, they promised again that
	the separate levels of lending and investment of the two banks
	would be maintained after the merger. Again, we weren't asking
	them to do more; we were just asking them to promise not to do
	less.
	We left that meeting very satisfied with the promises the
	bank made to us. We were confident that both Chase and Morgan's
	programs would continue intact.
	After the merger was approved, however, the bank honored
	none of the commitments it had made to us. They almost
	immediately eliminated important community development
	programs, they cut their community development budget and
	staffing levels, and they began to break up the community
	development group.
	So in this past year, when Chase then applied to purchase
	Bank One, we again submitted written comments to the
	regulators. These detail our experiences with the previous
	merger and also discuss how, as a result of the bank cutting
	back on programs, it was now less able to deliver services on a
	neighborhood level than it once had been.
	Neither the bank nor the regulators responded to our
	written comments, including the issue we raised that Chase had
	not honored previous commitments.
	So based on these experiences, it is our belief that
	current laws do not protect community interests after a merger.
	My written statement cites a number of areas where current law
	can be reformed. They're on Page 6 of my statement. Two of them
	echo what other witnesses have already said today. Currently
	regulators do not enforce CRA commitments, even those made in
	the course of a merger. We would urge the banks be held
	accountable for the CRA commitments they make.
	Second, the application review process looks at past CRA
	performance, but does not require that banks provide forward-
	looking CRA plans. We would urge that banks develop detailed
	specific CRA plans for each of their local markets as part of
	their merger application. Again, additional recommendations are
	in my statement.
	With a continuing trend towards mega-bank mergers, what we
	saw play out with JPMorgan Chase, we expect to see in other
	banks, too. It's very timely that Congress consider this issue
	and find ways to strengthen the CRA to better protect our
	communities.
	Thank you.
	Chairman Bachus. Thank you, Ms. Baldwin.
	[The prepared statement of Irene Baldwin can be found on
	page 91 in the appendix.]
	Chairman Bachus. Mr. Thall?

	STATEMENT OF MATHEW THALL, SENIOR PROGRAM DIRECTOR, LOCAL
	INITIATIVES SUPPORT CORPORATION

	Mr. Thall. Members of the Committee, thank you for the
	invitation and opportunity to testify. My name is Mathew Thall;
	I'm the senior program director of the Boston Program of the
	Local Initiative Support Corporation, or LISC. I've been in
	that position for 13 years and previously was the executive
	director of a CDC in Boston for a decade.
	LISC is the largest non-profit community development
	support organization in the United States. Since 1980, we have
	invested approximately $5 billion in 2,400 community
	development corporations working in and for low-income
	neighborhoods. This investment has entailed 147,000 affordable
	homes and over 22 million square feet of neighborhood
	commercial retail and community facilities space. In Boston,
	we've invested about $87 million over the past 24 years,
	leveraging about $725 million of other public and private
	investment, and helping to support over 6,000 affordable homes.
	LISC does a good deal more than just finance community
	development. We invest in building the capacity of CDCs and
	non-profits. We often serve as a catalyst to change the local
	system and attract new investments in community development. I
	have included in my statement a few interesting examples of
	this type of work in Boston, in Chicago, in Los Angeles and in
	Winston-Salem.
	I think I can say unequivocally that LISC would not have
	been able to accomplish everything it has accomplished without
	the Community Reinvestment Act. The CRA made it possible for us
	to develop strong relationships with banks, in Boston and
	nationwide. As the banking industry evolves, it becomes
	increasingly important to maintain a strong CRA in order to
	maintain those relationships and to continue the capital flow.
	CRA has worked remarkably over the past 25 years fostering
	and building public-private partnerships around community
	development. It has helped to weave a network of federal
	programs into private investment, including HOME, the low-
	income housing tax credit, new market tax credit. It has been a
	very, very powerful tool for building low-income communities.
	Now that partnership is in jeopardy. LISC is deeply
	concerned that a series of proposals from the FDIC and the
	Office of Thrift Supervision would begin to dismantle CRA and
	the public-private partnership CRA has represented.
	OTS has already reduced the oversight of mid-sized thrifts
	with assets between $250 million and $1 billion. The FDIC has
	proposed to do the same for the banks it supervises as well as
	to grant CRA credit for rural community development activities
	that do not serve low-income people or places. Now the OTS is
	considering letting institutions ignore investments and
	services under CRA.
	It is especially disturbing that OTS and the FDIC have
	acted on their own, without coordination with the Federal
	Reserve Board and the Comptroller of the Currency, discarding
	over 25 years of joint policymaking on CRA. Fragmented
	regulatory policies are not just confusing; they also invite a
	race to the bottom as banks switch charters to the most lenient
	regulation and the regulators compete to offer it. We fear that
	other destructive proposals may follow until CRA loses all
	significance. Struggling communities would suffer in many ways.
	I have attached to my testimony a copy of an op-ed article
	by LISC's chairman, Robert Rubin, the former Secretary of the
	Treasury, and our president, Michael Rubinger, which appeared
	in the New York Times on December 4, 2004. The article lays out
	a compelling case for keeping CRA strong, and I request that it
	be included in today's hearing record.
	The Committee has invited me to comment on Bank of
	America's performance to date on commitments that it made in
	connection with the merger with Fleet Boston.
	First, I should say that Boston LISC's experience with Bank
	of America per se is still young. Bank of America has been a
	very strong supporter of LISC prior to the merger. I refer the
	Committee to the testimony of Michael Rubinger before the
	Federal Reserve earlier this year.
	Bank of America has been a major and generous supporter of
	other LISC sites. Its staff have served on our local advisory
	committees, which are the local boards. Finally, Bank of
	America has directly financed and invested in CDC projects that
	have been ``seasoned'' by LISC's investments.
	While Boston LISC is still building a direct experience
	with Bank of America, we have had many strong and positive
	experiences with its legacy institutions: Fleet Boston,
	BankBoston, Shawmut Bank, and BayBank, to name a few.
	Several of Fleet's staff served on the Boston LISC advisory
	committee board and committees. LISC has done a tremendous
	amount of lending side by side with Fleet Boston in recent
	years. We have not only provided predevelopment loans to CDCs
	needed to get their projects ready to access financing provided
	by Fleet Boston, we have remained in a number of projects as a
	permanent lender with Fleet.
	LISC would not stay in a deal as a lender subordinate to a
	bank that it did not trust and hold in high regard.
	Bank of America has honored and in some ways strengthened
	the relationship we had with Fleet since the merger has
	occurred. We are partnering with the bank and the city of
	Boston on an initiative to address comprehensive community
	development needs in the Bowdoin/Geneva section of Dorchester,
	a neighborhood in Boston, a neighborhood that has often been
	overwhelmed by problems of poverty and crime. This was an
	initiative that the bank proposed, not LISC or the city.
	Boston LISC is about to enter the final year of a $33
	million campaign to raise and invest funds in the
	neighborhoods, towns and cities in greater Boston. Bank of
	America has honored Fleet's commitment to that campaign and has
	reaffirmed its commitment to leadership of that campaign. We
	are delighted that Anne Finucane will be taking the reins of
	chairing that campaign in the next year.
	In terms of concrete, measurable commitments, I believe
	that the merger of Bank of America and Fleet has definitely
	made substantially more resources available locally for
	community development. As part of the merger discussions, Bank
	of America agreed to convert a portion of a statutorily
	mandated loan to the Massachusetts Housing Partnership into an
	$18 million grant. There is no statutory or regulatory basis
	for securing this type of grant from an acquiring bank under
	Massachusetts law.
	Certainly, our very talented and sophisticated advocates
	deserve much of the credit for this commitment. However, Bank
	of America was under no legal obligation to make such a
	commitment. And as far as I know, an $18 million grant by a
	bank to a state agency for community development and housing is
	unprecedented in this country.
	$18 million for project financing, project and
	organizational support and technical assistance to non-profits
	will make a tremendous difference for a long time to come in
	supporting our collective efforts to develop more affordable
	housing and stronger communities.
	I congratulate the Bank of America for this financial
	pledge, and I hope the bank will be recognized for this
	commitment and consulted on how these funds can be most
	effectively deployed throughout the Commonwealth.
	Thank you again for the opportunity to testify.
	Chairman Bachus. Thank you.
	[The prepared statement of Mathew Thall can be found on
	page 328 in the appendix.]
	Chairman Bachus. At this time, we will entertain questions
	for our panel, and I'll pose the first question.
	We've heard testimony about commitments and pledges made by
	Bank of America. My first question would be, are you satisfied
	with the commitments and pledges? Not that they haven't been
	honored yet. We won't know whether they're honored until two,
	three, four years from now. But are you satisfied with the
	level of commitments and pledges?
	And I'll start with you, Ms. Flynn.
	Ms. Flynn. We're very satisfied with the commitments that
	have been made to date. The commitment, as Matt mentioned, to
	MHP is a great resource for non-profits to build affordable
	housing in Massachusetts. Their commitment to become a member
	of the Federal Home Loan Bank and other commitments that
	they've made to the SoftSecond program, they're wonderful.
	But the commitments aren't complete, and so we have
	outstanding requests that we've made to the bank that they have
	not agreed to yet, and I've outlined them. Those are basically
	four----
	Chairman Bachus. It does seem to me that the level of
	commitments and pledges has been--I think there's even
	agreement on this panel, that if they honor the pledges and
	commitments they've made, that would be very significant.
	Ms. Flynn. In the areas of mostly affordable housing and
	investment in housing, but there's still outstanding
	commitments that they need to make.
	Chairman Bachus. A lot of that is that this merger was
	already approved, so there's no obligation for them to do so.
	Ms. Flynn. Well, under the CRA regulations, part of the
	lending test asks how they've met credit needs for small
	business lending.
	Chairman Bachus. Right, the service and investment.
	Ms. Flynn. And those goals haven't been established yet by
	the bank.
	Chairman Bachus. But in some ways, I think I've heard
	testimony that maybe their commitments will go even beyond
	maybe what Fleet Boston was doing. Is that correct?
	Ms. Flynn. We don't know, because they haven't outlined, in
	terms of small business lending, what those commitments are.
	Chairman Bachus. My second question is, Ms. Baldwin talked
	about Chase and the fact that JPMorgan Chase made certain
	commitments, and I guess these are conversations with the bank
	officials. Were those reduced to writing, the ones that you say
	were not honored?
	Ms. Baldwin. In the case of JPMorgan Chase, it was just a
	meeting. I summarized the commitments in writing, but they
	didn't put it in writing. I did, and sent it to them, and sent
	it to the regulators.
	Chairman Bachus. You know, when you don't have it in
	writing, you learn in life that----
	Ms. Baldwin. Yes.
	Chairman Bachus. Have they denied that there were such
	conversations?
	Ms. Baldwin. No, they never denied. I should have pointed
	that out. And usually we do get them in writing. Usually the
	bank--we tend to be a little informal, because even if we had
	it in writing, we're not in any place to enforce it; so we tend
	to rely on the word and the good faith of the bank leadership.
	And this was the first experience I had where the bank just
	sort of blatantly didn't do what it said it would do.
	Chairman Bachus. But it's my understanding that some of
	this they submitted to the Federal Reserve, saying this is what
	we intend to do, which may not be a commitment. Is that true?
	Ms. Baldwin. At the hearing on the most recent merger, they
	made a very broad-based commitment for $800 billion over ten
	years; and, I mean, I'd speak a little bit about how
	satisfactory those commitments are.
	We have a one-page--all I know about that commitment is
	what I've seen at the Chase website. It's one page, and I don't
	know the details of it, so I don't know what they're going to
	be doing in New York City, which is how I define my community.
	Chairman Bachus. So the Federal Reserve, in reviewing
	these, is not asking for any specificity in the commitments or
	pledges or asking for any----
	Ms. Baldwin. I don't believe they even asked for
	commitments going forward, no.
	Chairman Bachus. Just review and see what they have done?
	Ms. Baldwin. I think so.
	Chairman Bachus. Let me close with this. One thing that
	Bank of America has done that we had at Wachovia Trust--which
	is the second largest bank in the state of Alabama, and they
	actually made no commitments to preserve employment levels.
	They actually said, you're going to lose over a thousand
	employees, which is obviously a discomfort. But we see that
	going both ways, businesses where one buys another.
	You've got a commitment here, at least a representation
	that's been made to the public through the press by the Bank of
	America, I believe, that the employment rate, or the employment
	totals in the State of Massachusetts by 2006 will be at
	premerger levels, which is a pretty substantial pledge or
	commitment. Do you wish to comment on that?
	And I know, Mr. Cofield, you've asked that, as they do,
	that they try to either preserve or be fair to both gender and
	race in doing that. But any comments there?
	I mean, that to me is a substantial at least representation
	that it is their intention that jobs won't be lost. Now, there
	may be some higher-paid jobs that are lost and lower-paid jobs
	that are replaced. Any comment on that?
	Mr. Cofield. I can't comment on the pledge of the overall
	job creation. That, I think, more than anything else, was a
	release in the papers and not necessarily a pledge to the
	community advisory group.
	Chairman Bachus. Of course, from a public relations
	standpoint, if it is released to the press and told by the
	press and it's out there, it's acknowledged by them, at least
	they're subject to----
	Mr. Cofield. Sure, and I understand that, and I appreciate
	that.
	The concern that I expressed about employment and
	procurement being reflective of the community is an important
	one; and I contrast Bank of America, who has not to date been
	willing to make any commitments or have any serious
	discussions, I would argue, about these two issues, I contrast
	that attitude with their two largest competitors here in
	Massachusetts. Those two largest competitors have had serious
	discussions with us, negotiations that resulted in commitments
	in those two areas that are reflective of the diversity of
	Massachusetts.
	That's important, and I have to say that I think that's a
	function in part--I certainly appreciate the leadership of the
	banks, and I think there is a lot of credit that is due the
	leadership of these two banks, and in particular Sovereign Bank
	of New England.
	But I also think it's a function of a bank that doesn't
	have to answer day in and day out to a community. If a bank is
	nationwide, it might be a little less receptive to responding
	to community needs in this manner; and I would hope that you,
	the Committee, would give that serious concern, because again,
	as I said, the CRA stands for Community Reinvestment Act and
	not a country-wide reinvestment act.
	Thank you.
	Chairman Bachus. And there certainly is a perception, I
	think, and a tendency, I think, for us to believe that a bank
	that is not locally owned or controlled may have a tendency not
	to be responsive.
	At this time I'll recognize Mr. Frank, Congressman Frank,
	whose efforts, I think, in regard to these mergers have already
	lessened the impact, the negative impact on the community; of
	him and the Massachusetts delegation as well.
	Mr. Frank. Thank you, Mr. Chairman. I guess lessening the
	negative impact is my goal for the next few years----
	[Laughter.]
	Mr. Frank.----so it's good to have had that experience.
	Chairman Bachus. Or enhancing the positive.
	Mr. Frank. You do what you can in life.
	Let me say, first, I have a couple specific questions for
	Mr. Thall. I very much appreciate your thoughtful warnings
	about what will happen to CRA.
	I've been a big CRA supporter; in fact, I put that article
	by Mr. Rubinger, into the Congressional Record. I was
	particularly struck by Ms. Hagins' comment that lending to low-
	income in general, and minority low-income mortgage groups, in
	mortgages, is twice as great for people covered by CRA as for
	people who aren't. This is very relevant data for us.
	And as you point out, because of changes in the financial
	sector, more and more mortgages are being granted by people who
	are not banks, and the banks who are under CRA are competing
	with them. I do think that's something we should be addressing,
	that there ought to be an extending of that CRA requirement,
	because I think it has had virtually no negative effect and
	some positive effect.
	So I will tell you that I did have a conversation with Mr.
	Powell from the FDIC, and he indicated to me that he accepted
	the fact that deciding that all rural activity was
	automatically CRA was not a good policy; and I think we may be
	able to at least re-establish that test, that low-/moderate-
	income test as a prerequisite in the rural area, but I
	appreciate that.
	Let me just say one of the things about Sovereign which I
	appreciated, and that is, Ms. Flynn mentioned one of the
	important things for us is the affordable housing program of
	the Home Loan Bank system, which is a program created by this
	Committee under the really superb leadership of the late Henry
	Gonzalez, who was then Chairman. We created this program where
	a certain percentage of the profits of the regional Home Loan
	Banks have to be put into an affordable housing program.
	With regard to Bank of America, the problem with the
	mergers goes to where the bank is headquartered, because when
	this program was set up, people weren't thinking that--I guess
	this used to be called the Banking Committee, and then it was
	changed to Financial Services.
	Somebody said, are we ever going to change the name back? I
	said, yeah; but by that time, we may change it to the Committee
	on the Bank.
	[Laughter.]
	Mr. Frank. What you have with the mergers is that there's
	now a disconnect between economic activity generated by a bank
	in a particular region and the Federal Home Loan Bank that gets
	the credit for that, because it goes to the headquarters of the
	bank.
	Now, one of the things that B of A did, and Maureen Flynn
	correctly gave them credit for that, was voluntarily to agree
	to take out an additional charter in the Boston area so that
	the money generated by B of A will go to the affordable housing
	program. Sovereign, to its credit, was willing to do that,
	because as a unitary thrift, as I understand it, they can't do
	it as easily. They've been working with us, and I'm very
	appreciative of Sovereign's working with us to try and enhance
	that.
	But now on Bank of America, let me say, I guess you get the
	question: Is the glass half empty or half full? And the answer
	is yes.
	[Laughter.]
	Mr. Frank. As Maureen Flynn pointed out, with regard to
	housing, I am very pleased that Bank of America has been very
	responsive. I said to others, housing is probably the greatest
	thing we need here in our area because of the extraordinary
	housing prices; but we do need economic activity to go along
	with it.
	Part of this may be a question of cultural difference. I
	understand for Bank of America to come into New England,
	sometimes things are done a little differently here. During the
	Democratic Convention, when some journalists were asking me why
	things seemed to be so hard-edged, people dealing with each
	other, I said, well, at some point we tend to do everything
	like we drive, in which you cut no one else any slack, but you
	get highly indignant if people don't cut you some.
	On the other hand, we have some real concerns here, and the
	economic one is real; and I must say, it has not seemed to me
	that what you were asking for was unreasonable.
	Let me ask both Mr. Cofield and Ms. Flynn: It seems to me
	that, in part, the issue is not so much the quantity of what's
	being requested, it hasn't been that people have said that's
	unreasonable; it's kind of a cultural objection to having it be
	specific. Am I correct? Does that seem to be part of our
	problem?
	Ms. Flynn. Yes, that's correct. We're not arguing about the
	amounts of commitment, especially on the small business lending
	piece; but we want to know, where is the small business lending
	going to be made?
	So, are there going to be loans in low- and moderate-income
	areas as the CRA calls for? Are there going to be loans of less
	than $100,000, again which is something that banks have to
	report on under the CRA regulations? And are there going to be
	loans--and this is perhaps the most important aspect to us--to
	companies with less than $1 million in revenue?
	As CDCs, we have small business technical assistance
	programs for many of our CDCs that help very small businesses
	start and grow, and often those small businesses have a hard
	time getting credit. That's what we're looking for, is to meet
	the credit needs.
	Mr. Frank. Let me say, I understand there's a tendency,
	always has been, to withdraw in a little bit of anger when
	people question our bona fides. I guess I would urge the banks
	that, you're dealing with people who have no particular reason
	to know you; maybe their life experience with large financial
	institutions hasn't been among their seven favorite memories.
	I would hope that the banks and Bank of America, would
	distinguish between--if you're being asked to do something
	unreasonable, let us know. And I would say to Mr. Cofield,
	obviously when we ask for a commitment in terms of percentages
	in diversity in both hiring and procurement, obviously we also
	have an obligation to make sure that we can show that it's
	reasonable, and be available to help achieve those goals. We
	understand naming the goal doesn't mean that you're
	automatically going to be able to achieve it. You have to work
	together towards it.
	But I would hope that people would not stand on the kind of
	ceremony and be offended at being asked to prove the bona
	fides. These are not personal relationships; this is not proof
	you love me. This is what has been an arm's-length situation,
	and there have also been these kinds of series of mergers, as
	Mr. Thall read off the list of entities that are now under the
	Bank of America roof. That's where we are.
	Let me just ask a question of Ms. Baldwin, because you've
	been talking about the negative effects of the JPMorgan Chase
	merger on community reinvestment. What about, now, the addition
	of Bank One? Because this very big bank has just gotten bigger.
	What's the experience been? I know Bank One hasn't been
	operating in your area, but I know in the Midwest, it's
	particularly in that area, where the Chairman of our Committee
	is. What have you heard about the addition, or has that caused
	further problems; do you know?
	Ms. Baldwin. It's a little early. Actually, technically
	Chase is buying Bank One, although it's playing out as if Bank
	One had bought Chase.
	One of our concerns is that the retail headquarters is
	going to move to Chicago, and the difficulties we have now
	working with Chase on a neighborhood level we're just concerned
	might be more difficult if everybody we speak to is coming out
	of Illinois.
	Mr. Frank. Let me just comment on that. I would hope all
	the banks would understand that it's a natural human tendency
	to feel more comfortable with people who are nearby, with
	people whom you know, who you think know you.
	When these mergers happen and headquarters get moved
	further and further away, I hope the banks will understand that
	it is important to reassure people. They tell us there isn't
	going to be any real difference, et cetera. Well, then you
	shouldn't be reluctant to let people know, because the degree
	of unease that is cascading here is very significant.
	Thank you, Mr. Chairman.
	Chairman Bachus. Thank you, Mr. Frank.
	At this time, Mr. Murphy?
	Mr. Murphy. Thank you, Mr. Chairman; and thank you,
	panelists, first of all for the people that you represent, the
	thousands, perhaps millions that you represent, and your care
	and concern about them.
	I'm pleased you bring these issues before this panel,
	because although this is the Committee on Banking and Financial
	Services, ultimately our concerns reach down to individuals
	like you represent to make sure that people have opportunities
	always to live under an equality of law and have opportunities
	to climb upwards.
	I'd like to start out by asking if any of you were
	individually involved in some of the discussions referred to
	before, with Sovereign Bank and Citizens Bank.
	Ms. Flynn. Yes. Actually, our three organizations were all
	involved in all of those negotiations.
	Mr. Murphy. Let me ask about this: How long did that
	process take from the time that the merger actually was
	finalized at the board until you achieved some results and
	agreements on this?
	Ms. Flynn. Well, the Sovereign negotiation wasn't pursuant
	to a merger; it was an extension of a previous commitment that
	they made. That agreement was almost complete a year after it
	began, but then it took a little longer than that, because
	there were some----
	Mr. Murphy. A couple years?
	Ms. Flynn. Almost two, I think.
	And the Citizens one, I believe it was a lot shorter than
	that, but I'm not sure.
	Mr. Murphy. How much shorter, would you say?
	Mr. Cofield. Six months to a year. In a general sense, that
	was a general commitment made pretty quickly in both cases, and
	getting down to the specifics took longer in both cases.
	One of, I think, the important distinctions is an attitude
	about working with the community groups. We saw it with
	Sovereign and Citizens Bank pretty quickly, if not immediately.
	There was an openness and an attitude that we were trying to
	get to a goal, and it was just a series of negotiations.
	I have not seen that with Bank of America until this past
	Thursday, December 9; and as I said in my opening remarks, you,
	by coming here and having this hearing, has had an impact in
	and of itself.
	Mr. Murphy. I have a feeling that's why we're here.
	[Laughter.]
	Mr. Murphy. I want to ask, try and lay this out: This
	merger really didn't begin until March of this year, so it's
	about eight months--excuse me; it wasn't really finalized until
	March of this year, so really it was eight months away.
	Ms. Flynn. But we submitted our proposal in November right
	after the acquisition was announced.
	Mr. Murphy. And during that time, between when the intent
	of the acquisition was announced and when it was finalized,
	were there any discussions that took place at all.
	Ms. Flynn. Yes.
	Mr. Murphy. So they didn't shut you out. I just wanted to
	make sure of that.
	Ms. Flynn. But the discussions were around whether they
	were going to do a plan. The discussions with Citizens and
	Sovereign were about an agreement, a partnership, between the
	bank and the community.
	Mr. Murphy. Was there somebody even assigned to talk with
	you in these negotiations?
	Ms. Flynn. With Sovereign and Citizens? Yes.
	Mr. Murphy. But also with Bank of America?
	Ms. Flynn. Yes.
	Mr. Murphy. I just want to make sure I'm understanding,
	because what you're describing is very, very important. In
	part, I want to make sure we're not--like we're in the third
	inning; we're not judging what's going to happen in the ninth
	inning.
	But the other issue is, what you're describing is an
	important--I don't know if ``attitude'' is the right word, but
	an attitude of openness that you would like to see more of, at
	least as things have begun to happen.
	Yes, Ms. Hagins?
	Ms. Hagins. To be fair, when they came and met with us in
	November--this is Bank of America--we talked to them about the
	SoftSecond mortgage program, which Fleet had already been doing
	for a number of years since they came into Massachusetts. We
	had an agreement almost within a couple of weeks in November
	with the SoftSecond mortgage program.
	Mr. Murphy. That's good to hear.
	Ms. Hagins. Because it's a mortgage product that works
	well.
	Mr. Murphy. So in some areas, they did move rather quickly;
	in other areas, you want to see their continued progress moving
	some of these, particularly the hiring practices and the
	availability of mortgage--I know in Pittsburgh, we went through
	some of this when Mellon Bank sold off all their branches to
	Citizens Bank.
	It was locally of concern to them, the very same thing:
	What would happen to the local commitment? Who would be hired,
	and what jobs would be lost?
	We found that, over time, growth was taking place. We also
	worried about the impact on all the other banks headquartered
	in the Pittsburgh region, some fairly sizable banks; wondered
	what would happen with those. Over time, I've seen a number of
	these things work out, and to a large extent because folks like
	yourselves remain vigilant to that.
	I see my time is up. Thank you, Mr. Chairman.
	Chairman Bachus. Thank you.
	And, Mr. Watt, before you ask your questions, what we've
	done on this thing, normally what we would do is go by the
	Committee Members and those off the Committee; but the
	Committee felt like the Members from Massachusetts, whether
	they're on or off the Committee, we would go by seniority of
	all the Members here.
	So the order will be Mr. Watt, Mr. Capuano, Mr. Meeks, Mr.
	Tierney, Ms. Lee--Capuano, Meeks, Tierney, Lee and Lynch. So
	that will be the order.
	Later, as Members outside the state like Ms. Lee may have
	to catch a plane, we will allow them to go before other
	Members.
	So at this time, Mr. Watt?
	Mr. Watt. Thank you, Mr. Chairman. You've just reminded me
	how old I'm getting, if you start looking at it in those terms.
	[Laughter.]
	Mr. Watt. I've made five points that I want to try to make,
	not necessarily around questions.
	First of all, I want to applaud Barney's role,
	Representative Frank's role, in this whole process.
	Many of you probably don't know that the first news I got
	of the Bank of America/Fleet merger was from Barney. I had been
	in Detroit at a Democratic presidential debate, and I had been
	traveling all weekend, and then I was going from Detroit to
	Chicago for a meeting at the Board of Trade. The first person I
	ran into when I got to Chicago that morning was Barney Frank,
	with this white look about him, saying, your bank has taken
	over my bank.
	Fortunately, the first time I had heard that, I heard it
	from folks in Florida when Bank of America went to Florida; I
	had heard it from folks in Texas when they went to Texas; I had
	heard it from folks in California when they went to California;
	and I had heard it in other contexts when First Union and
	Wachovia had gone to other places. So it's kind of a unique
	experience.
	Chairman Bachus. We were also getting tired of it, you
	know.
	[Laughter.]
	Mr. Watt. But Barney's role in this, from that moment, we
	worked together to try to make sure that the commitments that
	were being made were genuine and that Bank of America lived up
	to the commitments that it made; and I want to applaud Barney's
	role in making sure that these hearings and the specifics of
	these commitments get lived up to.
	Second, I want to applaud the panel this morning because
	you didn't come in talking about generalities; you recognized
	that specific commitments are talked about in communities where
	banks and people live; so every one of you, as you went down
	the roll, talked about the specifics of the communities that
	you represent.
	I think that's an important challenge to make to Bank of
	America, because the comment about CRA not standing for Country
	Reinvestment Act but Community Reinvestment Act is an important
	one.
	Third, I want to say that we have, in a sense, taken a lot
	of these kinds of things for granted in our Charlotte
	community, in our North Carolina community, from Bank of
	Charlotte to North Carolina National Bank to NCNB to Nations
	Bank to Bank of America.
	There have been a certain set of expectations that we
	haven't even tried to document in our communities, because we
	have seen the dramatic impact that a financial institution,
	with good intentions and with lots of resources--in fact, three
	financial institutions--Bank of America, Wachovia and First
	Union, and now the combination of those two after the merger--
	can have on a community.
	Bank of America and First Union and Wachovia have had
	transformative impacts on the skyline and the community fabric
	and the employment fabric and the procurement fabric of our
	communities in ways that--I mean, I could go on and on,
	including the neighborhood in which I live, when I was on the
	NCNB Community Development Corporation board, stabilizing that
	community.
	But it's all been an assumed part of what would happen
	rather than a contractual part. And when Barney was talking
	about the specific written commitments, I could understand the
	difference, because it hadn't always been about signing an
	agreement; it's been about seeing the results of those
	commitments without even having the benefit of an agreement.
	But Bank of America needs to understand that as it expands
	to other parts of the world where they don't have the benefit
	of that good will, there needs to be a different dynamic; and
	the same kind of commitments that have been made or the same
	kind of performance that has been reflected in our communities
	that we have taken for granted will be now expected to be
	reduced to writing and delivered upon in different locations in
	a different kind of framework. That's the cost of becoming a
	national bank: the lack of community confidence that it will
	just happen.
	So my final point--and I'll follow this up with questions
	to the Bank of America representatives when they come--is that
	the commitment to CRA, the lending commitment to serve the
	credit needs of a community, the commitment to employment, the
	commitment to procurement, it seems to me has to be as basic a
	part of a merger and results evaluation of a financial
	institution as serving the wealthy investment people--I notice
	we're moving 300 jobs here to serve the wealthier people--or it
	has to be as basic a part of the commitment as, what happens at
	the bottom line?
	Because that's what we expect banks to do in this country;
	and while it's not mandated except in the CRA from the lending
	perspective, there is an expectation that banks and every
	institution in our society will do their part to eradicate the
	disparities that exist in employment opportunities and business
	opportunities and small business opportunities and procurement
	opportunities because those disparities continue to exist.
	So I didn't ask a question; I made a series of comments.
	But I hope this helps put in context that national statistics
	don't always tell the story of community reinvestment.
	Community reinvestment is evaluated in communities in which
	institutions live and work, and those specific kind of
	expectations have to be a part of achieving the global CRA and
	community expectations that we all want to have, do have,
	sometimes in not so supportive political climates or economic
	climates, but the expectations and aspirations are still there.
	Chairman Bachus. Thank you, Mr. Watt.
	Mr. Capuano, you're recognized for any comments or
	questions you might have.
	Mr. Capuano. Thank you, Mr. Chairman.
	First of all, I want to welcome you all here to Boston. We
	tried to do the best we could with weather, but hopefully it
	won't snow before you leave.
	I want to thank all the panelists for being here, and I
	also want to make a brief commentary first.
	We're going to talk a lot about the future, but there's
	also one segment of the people impacted by this merger that are
	not directly represented here, and that's the employees of the
	former Fleet and the new soon-to-be, or actually now, Bank of
	America. And I will have some questions for the people who
	represent the bank later on.
	But I actually think it's too bad that we don't have
	somebody that we could talk to about employees, and that's a
	function of the fact that the financial services industry is
	not very well unionized. Therefore, they don't have spokesmen.
	And I take this opportunity to encourage those people that work
	for various large institutions like that to get together so
	that people like me can have a representative to ask questions
	that you're not really qualified to answer.
	I also want to make a point--and I know that people on the
	panel know, but I want everybody to make sure that we are very
	clear--though we've said some good things about other banks,
	Citizens is run out of Scotland; Sovereign is run out of
	Pennsylvania. They are not local banks.
	I actually find it refreshing that although they are not
	technically local banks, we treat them as if they are. I think
	that's a function of leadership, and more importantly, the
	authority that the local leadership has been given by their
	various corporate boards to actually run it as a local bank,
	and I think the question is still there relative to the Bank of
	America.
	They have appointed some people that are local and that, as
	far as I'm concerned, are very good people that we can work
	with. I think, for me, the question is, do they have the
	authority to really act as a local bank? I think that just
	takes a matter of time to make that determination.
	The questions I have really revolve around a document that
	I just got Sunday at 10:30 at night that I guess some of you--I
	assume all of you have seen it as of Friday, or most of you
	have seen it--something called the Community Development
	Strategic Business Plan from the Bank of America.
	As the Chairman said earlier, I mean, some of the numbers
	here are pretty good. We've seen most of these numbers before,
	and it's great that affordable housing is going to get four
	billion one hundred eighty-five million dollars over the next
	several years. That's a wonderful number. Without having looked
	at the statistics as to whether that really is a wonderful
	number, I will accept it as such, because it's a huge number,
	and that's great.
	Can any of you tell me where that money is going?
	Ms. Flynn. Any of us panelists?
	Mr. Capuano. Yes.
	Ms. Flynn. No. We asked the question, what was included in
	that; and there was a little confusion around what was included
	within that category. So it seems to be affordable lending,
	some mortgage products, and some investment in rental and real
	estate projects; but we're not sure what----
	Mr. Capuano. Have we defined the terms ``low'' and
	``moderate income''? Have they accepted them as certain
	definitions, or are they generic definitions?
	Ms. Flynn. No, we don't know what the term ``affordable''
	means under this.
	Mr. Capuano. So we don't know what towns they're going to?
	Ms. Flynn. No.
	Mr. Capuano. We don't know what category of people?
	Ms. Flynn. No.
	Mr. Capuano. Do we know whether these are homeownership or
	rental?
	Ms. Flynn. No.
	Mr. Capuano. So we just know a number.
	Ms. Flynn. Right.
	Mr. Capuano. What about small business? One billion three
	hundred fifty million.
	Ms. Flynn. The same. We don't know any information; we
	don't know how many small businesses, how many loans, if it's
	going to cover the entire state, whether outside of Boston will
	be the beneficiary of any small business loans, whether smaller
	small business loans will be able to access this kind of
	credit.
	Mr. Capuano. So we know a number, and that's about it?
	Ms. Flynn. Right.
	Mr. Capuano. I assume no one here is holding back
	information on this.
	Ms. Hagins. Well, we have a commitment for ten years for
	3,000 mortgages, but it doesn't have a dollar figure.
	Mr. Capuano. Mortgages to whom?
	Ms. Hagins. To the SoftSecond mortgage program.
	Mr. Capuano. To the program that already exists?
	Ms. Hagins. Right.
	Mr. Capuano. That's good. So that's a program we know is
	going to qualify, and we know how it's going to work. Good.
	Again, I read the document; I've read it several times now,
	and it's a pretty good document. I like the numbers, I like the
	generic, broad-bush thing; but I'm kind of left a little empty.
	I mean, promote affordable housing production through a
	continuation of partnerships with the Mass. Housing Investment
	Corp. Great organization; they do wonderful work. Mass. Housing
	Partnership; again, great. Mass. Development, Mass. Housing,
	CDAC--do we know how much each of those organizations are going
	to get?
	Ms. Flynn. We know just how much Mass. Housing Partnership
	has received, but that's a requirement under state law, for
	them to receive a certain amount of loan obligation. Bank of
	America did convert some of that loan obligation to grant, so
	we know how much that is.
	Mr. Capuano. The thing I like is, the bank will convene a
	national advisory council made up of prominent public and
	private sector leaders throughout the Bank of America
	franchise. Could you tell me who the national advisory council
	would include? Any of you?
	Ms. Flynn. We don't know.
	Mr. Capuano. Any of your organizations?
	Ms. Flynn. We don't know.
	Mr. Capuano. I guess for me, it's a great document; there's
	really nothing I can criticize in this document; but, okay, now
	what? Have you had any idea of when we're going to get a little
	bit more meat on these bones?
	Ms. Flynn. No.
	Mr. Cofield. No.
	Mr. Capuano. Just out of curiosity, when you did Citizens
	and Sovereign, which obviously I was involved in, did you get
	this level of detail or this lack of detail?
	Ms. Flynn. We had an agreement with both of those banks,
	and they were probably six or ten pages each. I have copies of
	them here. They outline each of the areas that they are going
	to be lending in; the number of loans going to LMI areas, et
	cetera; the amounts of commitments to MHIC; the amounts of tax
	credits they're going to purchase.
	Mr. Capuano. My final question, because my time is running
	out: Have you had any indication of when there might be meat
	added to these bones? I mean, are you meeting tomorrow to put
	some meat on this, or next week, or next month, or next year,
	or in my lifetime?
	Ms. Flynn. We understand that this is the plan they
	promised us from Massachusetts.
	Mr. Capuano. Thank you, Mr. Chairman.
	Chairman Bachus. Thank you, Mr. Capuano. You probably
	should have been a lawyer.
	Mr. Capuano. Would have made more money.
	[Laughter.]
	Chairman Bachus. At this time, Mr. Meeks?
	Mr. Meeks. Thank you, Mr. Chairman.
	And I, too, want to first thank all of you for your
	testimony today; but furthermore, I want to thank you for what
	you do every day, because what you do every day is looking out
	for those who may be less fortunate than most, and what you do
	every day is try to make sure people indeed have an opportunity
	to share in what folks call the American dream: that is home
	ownership, that is to have a job, a roof over their head, and
	that is to have a better life, to afford them the opportunity
	to give their children a better life than they had themselves
	when they were growing up.
	So you should be commended for what you do every day. Most
	of your jobs I'm sure don't make you rich. You don't get the
	huge bonuses that others may get for what they do, but your
	commitment is what makes this country great, and I want to
	thank you for it.
	Financial institutions and financial services, of course,
	coming from New York, it's the backbone of New York. I've heard
	my colleague Mel Watt talk about Charlotte. I know we're here
	in Boston, et cetera; but without financial services in New
	York, this city, and indeed this nation, could be greatly
	affected.
	I can recall, about twenty years ago in New York we had six
	major national banks. Today, they're down to three. I mean,
	it's like we had, I think it was Citibank, Chase Manhattan,
	Chemical Bank, Manufacturers Hanover Trust, NatWest, and
	eventually Fleet Bank, and of course JPMorgan was there doing
	all of the high-end privileged services.
	Then we had Citibank; Citibank is still Citibank. Manny
	Hanny was swallowed by Chemical. Chemical then melded with
	Chase. Chase then merged with JPMorgan, which now has merged
	with Bank One.
	The thing that concerns me at some times is that maybe ten
	years from now we'll have one bank, one insurance company, one
	securities company, and all will be affiliated through Gramm-
	Leach-Bliley, which can have an effect on competition, and
	therefore on services that may be in the community.
	Now, I understand that financial institutions have to make
	some money, and I'm not opposed to them doing that. In fact, I
	want to encourage and help them to do that.
	But I have some concerns with reference to making sure that
	we continue in the climate of the negotiations that go on once
	we have these mergers. What I'm hearing from the panelists here
	is, it seemed to have been a different climate when you had the
	negotiations with Sovereign as opposed to negotiations that are
	currently going on.
	So I guess, before I make that assumption, is that correct?
	Is there a different climate in the negotiating rooms that
	you've had with both?
	Mr. Cofield. Certainly, on the two aspects that I spoke
	about, a very different climate. That's what I was making
	reference to when I referred to an attitude of openness. It's
	just quite different.
	Ms. Flynn. I agree. The negotiations weren't pretty with
	Sovereign or Citizens. The bank pushed us; we pushed the bank.
	But in the end, what we got out of it was an agreement, a
	partnership, about how to meet low- and moderate-income credit
	needs in the Commonwealth.
	So in the end, there was an agreement, a partnership.
	Mr. Meeks. Now, let me jump to--and I know Mr. Cofield
	mentioned this, but I'll open it up.
	In regards to either with Sovereign and now dealing with
	Bank of America, is there any specificity with reference to any
	goals in regards to procurement, in regards to employment of
	African-Americans and minorities and women?
	Mr. Cofield. Yes, there is. And Maureen is absolutely
	right; that took some time and negotiation.
	People of color represent roughly 20 percent of the
	population of Massachusetts--it's a hair under 20 percent--and
	people of color meaning blacks, Latinos, Pacific, Asian-Pacific
	and Native Americans. That represents roughly 20 percent, close
	to 20 percent, a hair less than 20 percent of the population of
	Massachusetts.
	Our approach was, that diversity in Massachusetts ought to
	be reflected in the employment levels of the bank and in the
	way the bank does business; and we think that's reasonable,
	that the bank's business reflect the population.
	We did achieve that aim with those two banks. With
	Sovereign, we first had a five-year agreement right after their
	merger; and because Sovereign was new here and we didn't know
	how they were going to work out, and they probably weren't so
	sure, the agreement called for a renegotiation of the five-year
	deal three years into the deal. So we had an agreement
	initially. That agreement was renegotiated over the past few
	months and signed a few days ago.
	And let me say, to Sovereign's credit, what they've agreed
	to do is to sign a totally new five-year deal; so they have
	added on three more years beyond what was initially required in
	the five-year agreement.
	Mr. Meeks. Are you anywhere currently with Bank of America
	in regards to goals?
	Mr. Cofield. No, we are not; and that's what I referred to
	as disappointing.
	I had at least a refreshing conversation with the two bank
	officials on Thursday morning, and it was an extended
	conversation. But there has not been a definitive discussion
	about the two issues that I've raised at all, and what they
	have referred to is their national plan.
	That's why I refer to the CRA being a community-based plan
	and not a country-wide-based plan. I hope we would get there;
	there was no indication that we would get to the community-
	specific level in the discussion on Thursday. I did see a
	change of attitude in that discussion, and I'm hoping that it
	would get to the level of specificity that we have with
	Sovereign and Citizens.
	They are well aware that their two largest competitors in
	Massachusetts have provided the specificity, and that's what
	we're looking for, and we think it's most reasonable. To have
	any other plan would suggest that you're going to continue to
	have an employment level that shows disparity, and a
	procurement level that shows disparity.
	Mr. Meeks. My last question--I see my time is up--this is
	to anybody, because I haven't heard anyone speak of it, but I
	know particularly in communities where there are poor people,
	as far as education is concerned, one of the biggest
	disparities is the lack of understanding, in public schools in
	particular, where there's no financial literacy being taught.
	So my question to anyone is, is there a discussion ongoing,
	whether it was with Sovereign or with Bank of America or with
	anyone, about a part of CRA being investments within
	particularly public schools in regard to teaching young people
	about financial--or making them become financially literate, so
	therefore they can take care of their money and understand
	better how to operate and deal on a personal level when they're
	banking with whatever the financial institution may be?
	Mr. Cofield. Certainly some of the organizations that are a
	part of the Community Advisory Committee provide programs
	dealing with financial literacy. And I agree; I too think that
	that's very important.
	To the extent that these institutions are supporting, by
	grant and in other manners, those organizations that are
	providing that program, I would answer yes.
	Chairman Bachus. Thank you, Mr. Meeks.
	Mr. Tierney?
	Mr. Tierney. Thank you.
	Thank you, Mr. Chairman. I want to thank you for working
	with Congressman Frank to bring this hearing to Boston and the
	Massachusetts area, and I want to thank you also for allowing
	me to join the Committee, and all of the other Members for
	their courtesies in terms of letting me be here, as well as the
	order of speaking; and I appreciate that a great deal. I thank
	all the witnesses for their testimony and for what you
	contribute to our life around here.
	I seem to hear over and over again that this is a situation
	where we need a good negotiation to be conducted on the
	important matters, and that where you've had that negotiation,
	everybody has benefitted. It's been good for the banks, good
	for the groups for which you advocate, and good for the
	community.
	Somebody described--I don't know if it was Ms. Baldwin or
	who it was that said it--there was a push and shove, push with
	Sovereign, Sovereign pushed back, and the same with Citizens.
	It appears to me here that in the past, Bank of America
	doesn't like being pushed, either because they think they're
	too big for it or because they haven't yet focused on the local
	idea in how allowing this to go on is really going to be
	important for this region and for the local aspect of this. So
	hopefully we can ask some questions about what the attitude
	situation is at the bank when we have those witnesses here.
	I would like to ask just two questions.
	One, Mr. Cofield, when you talked about race, which I think
	is important, how would you propose that the current law be
	changed in order for us to address the continuing concerns
	regarding that issue?
	Mr. Cofield. It is my firm belief that we should be working
	towards a goal in which race is no longer an important issue in
	our nation and in our communities.
	I would like to, at some day, see that there's no more of a
	need for an NAACP, that we as a nation have gotten beyond the
	issue of race.
	I truly believe that if we're going to get anywhere near
	there, we need to work towards a solution that ends disparity
	and not supports disparity; and that's what I'm trying to
	convey and is the thrust of my presentation. We need a program
	that doesn't continue to support disparity.
	That's the distinction that I've seen today between our
	dealings with Sovereign and Citizens. I think both of them get
	it, and I do give a lot of credit to the leadership of both. We
	just haven't seen it today.
	Mr. Tierney. Can I interrupt you? Only because I'm limited
	in time, and I want to do this as respectfully as I can; but
	how specifically are we to change the law? I think your goal is
	exactly on point. But is it the law that we need to change, or
	is it the enforcement aspect?
	Mr. Cofield. It's probably both; but certainly as it
	relates to the law, in my opinion, there ought to be specific
	language in the CRA that requires an institution, when it goes
	or is already in a community, that it set up programs to
	reflect the racial and gender disparity in both of those areas,
	in employment and in procurement.
	And I think that's rather easy. There is available census
	data that shows the diversity of a community, and in my opinion
	there ought to be specific language in the CRA regulations, in
	the CRA statute, that requires that a bank, in operating in a
	community, reflect the diversity in that community.
	Mr. Tierney. Thank you. And then I suspect that that
	wouldn't do much good unless we had some enforcement mechanism
	on that after the merger on that.
	Mr. Cofield. Absolutely.
	Mr. Tierney. Ms. Flynn, let me ask you the same question,
	but this time with regard to the small business lending. What
	changes in the statute do you think are necessary to allow us
	to address the concerns that some institutions may not be
	focusing on how they're going to distribute small business
	lending?
	Ms. Flynn. I think the statute, as written, is pretty
	broad. It says that banks should affirmatively try to meet the
	credit needs of the communities in which they serve.
	So even issues around race and how they are going to serve
	communities of color could be met under the current law. It's
	how the law is interpreted under regulation.
	Right now, there is an emphasis in the regulation on
	serving the needs of low- and moderate-income communities, and
	that's great; but it doesn't exclude the need to look at how
	communities of color have been served.
	So if the regulations were tweaked to be more specific
	about the communities and individuals within the community that
	should be served by the banks, that would be an improvement.
	Secondly, on the small business aspect, again, the banks
	must report under CRA how they've done on those three
	categories of small business lending. So it's there, but
	perhaps a greater emphasis on that part of the test in awarding
	grades on CRA would be beneficial.
	Mr. Tierney. Thank you very much.
	Mr. Chairman, thank you again.
	Chairman Bachus. Thank you.
	Mr. Lynch?
	Mr. Lynch. Thank you, Mr. Chairman.
	I have a statement I'll enter into the record, in the
	interest of time; but I do want to say, if I could go back to
	Mr. Frank's opening statement, he talked about the rhetorical
	question about what Congress's rightful role here is in
	requiring a private entity or private entities to make such
	sizable contributions to the public good and in some cases of a
	charitable nature.
	I just want to emphasize or re-emphasize his conclusion
	that government has played a significant role in creating banks
	of this size. We have enhanced and protected the position of
	Bank of America. We have seen them acquire a number of banks,
	and now they have become so large and so overpowering and so
	overwhelming to the average citizen, and now even the average
	community, that I think it is entirely reasonable for citizens
	and their representatives to come to Congress to ask Congress,
	that created these conditions of powerlessness in many
	communities, to be their champion and to speak on their behalf.
	I just want to thank the panel for measuring the unmet need
	in their communities and coming forward and articulating so
	well on behalf of all of our communities, of color and of need,
	and helping us to close the loop, if you will, with the Bank of
	America and Sovereign as well in terms of addressing that
	inequity in power between our local communities and this bank;
	and also somehow keeping that close connection between our
	banks and those local communities so that that community
	connection is not lost when these banks, as Bank of America has
	become a bank with over a trillion dollars in assets, and a
	far-flung empire from California to Boston and everywhere in
	between. It's very difficult for local communities to get
	response and to remain a viable priority in the eyes of such a
	huge organization.
	So I want to thank the Chairman, and I want to thank my
	colleagues in the Congress for honoring us, really, and giving
	this wonderful courtesy to come to Boston, to my district.
	I also want in particular to thank Ms. Hagins for her work.
	I grew up in the Old Colony housing projects not too far from
	here, and I know how important that SoftSecond mortgage program
	is for a lot of my constituents who are still struggling to buy
	their first home.
	That first homebuyer program is a great program, and we
	need to see more of that continue; and if it were not for the
	work that is being done by Ms. Hagins and others who are here
	today representing our CDCs and affordable housing advocates,
	this need would be lost. It would be lost in the shuffle, and
	the problem would grow worse, not only in the city of Boston
	that I represent, but also in the city of Brockton that I
	represent that is about 40 minutes from here, and all the towns
	in between.
	So I appreciate the good work being done by this panel and
	the spirit of cooperation we've seen from Bank of America and
	Sovereign thus far.
	Thank you.
	Chairman Bachus. Thank you.
	Ms. Lee?
	Ms. Lee. Let me first thank our Chairman and also
	Representative Frank for calling this hearing and for our
	panelists, for your very succinct testimony.
	Of course, I have much history with Bank of America, going
	way back to before its leaving San Francisco and Oakland.
	During the late '80s, mid to late '80s, in low-income/moderate-
	income communities in my area, B of A unfortunately began to
	leave; it wasn't profitable enough. We saw then the rise of
	predatory and payday lenders, and there was a big void in the
	Bay Area as a result of that.
	Then of course, unfortunately, with the move to Mr. Watt's
	district, we still haven't recovered from the negative economic
	impacts in terms of employment and really a turnaround in terms
	of what we had hoped to take place with regard to economic
	investment and compliance with CRA.
	A couple of things I'd like to just ask panelists.
	First of all, in any financial transaction between a
	consumer and a financial institution or a credit card lender or
	any organization, the consumer is required to live up to their
	commitments as they engage in these negotiations and these
	agreements. There's a penalty if they don't live up to their
	commitments.
	With regard to CRA--and I've heard this over and over and
	over again--commitments are made during the merger process;
	they may or may not be specific; but after the merger takes
	place, it's like you would never believe there were any
	commitments made.
	We heard during this last election the notion of values,
	that ethics was very important; and I'm just wondering--and a
	consumer would be considered--you know, that behavior is
	considered unethical.
	I'd like to just ask the panelists how you viewed not
	living up to a commitment in order to get a deal done, and
	then--and I'll ask the banks this, also--then say either we
	didn't make the commitment, we did make it, it wasn't what you
	thought it was, we need to go back to the drawing board.
	What are the ethical kinds of dimensions of that that we
	really need to look at, aside from the legal aspects? Which I
	think there should be penalties, quite frankly; if in fact
	organizations and financial institutions say they're going to
	do something, then they should do it. But beyond that, how do
	we look at the correctness of that just in terms of American
	values?
	Ms. Hagins. I know we have written agreements with all of
	the banks that do the SoftSecond mortgage multi-year
	commitments. No, we can't go to court and use them, but we hope
	that they would live up to those commitments. We meet with the
	banks every year to make sure that they are on tune to do the
	number that they've agreed to do.
	We will hold a community meeting, as we did--the last one
	was two years ago with 1,500 people in the room--and they have
	to be accountable to those people. So we try to make them
	accountable in that way, because we don't have any legal
	recourse other than that.
	Mr. Frank. That does include the Bank of America in this
	case, correct? They have a written agreement.
	Ms. Hagins. Right, they have a written agreement for ten
	years for 3,000 loans for the State of Massachusetts.
	Mr. Cofield. Congressman Lee, I do see it as a moral
	commitment. And the role of the Community Advisory Committee
	and the organizations that compose that loose-knit coalition is
	to stay in place; one, first to negotiate what we believe is a
	reasonable agreement with the institutions, and then to work
	with the institutions to help them achieve the goal.
	And generally that's the way it has been working here;
	sometimes better than others, but that's the way it has worked
	here, as we have reached these agreements, and the CAC stays in
	place and sees it as its role; and the banks that we have dealt
	with generally have seen that as a positive thing, so it has
	worked well.
	But clearly, we believe that it's certainly a moral
	commitment, if not a legal commitment.
	Ms. Lee. Ms. Baldwin, can you comment?
	Ms. Baldwin. Yes. I personally have had a lot of
	frustration with our experiences with JPMorgan Chase. I'm not
	naive, but I was sort of shocked that a reputable institution
	just wouldn't do what it said it would do.
	Usually the discussion is around, well, gee, maybe we
	misinterpreted our various commitments, where the bank is
	saying they would do A and they thought they were honoring it,
	and we had a different idea in mind.
	Most often we do get letters in writing, saying they'll do
	certain things. I have no idea if those are legally enforceable
	or not. And banks generally--where I run into difficulty is
	monitoring. I've had some banks tell me, yes, we're doing what
	we said we would do; but we won't give you the line-item detail
	on what these community development loans were. You just need
	to trust us that we're doing it.
	The other issue I have is that although these commitments
	aren't required to get the merger approved, they announced them
	in the course of the merger. So I do think, since that was the
	context they played out, the regulators really should look at
	it and hold them accountable to honor what they were doing.
	Ms. Lee. Should past compliance with any type of CRA
	progress be part of the criteria for a merger, or is it only
	prospective? Or should it be just prospective?
	Ms. Baldwin. Well, it's actually overweighted on past
	performance; and my sense, from when I read the approval
	orders, they rely very heavily on CRA performance evaluations.
	Those CRA performance evaluations I don't think look
	specifically at how banks have honored existing CRA
	commitments. I'm not sure.
	But there's no requirement that going forward, that any of
	these banks do a specific CRA plan.
	Ms. Flynn. I think one way to deal with this issue is, on
	the next exam after a bank, two banks have merged, on their
	next CRA exam, to bring this up as an exam question, if you
	will, that the banks should be graded on immediately after they
	merge so that they are held accountable to the promises and the
	commitments that they made before they merged.
	Ms. Lee. Thank you very much.
	Chairman Bachus. Thank you very much; and Mr. Frank, as he
	said, your testimony was very helpful. We appreciate your
	attendance here today.
	At this time we'll call our second panel.
	Our second panel is Ms. Anne Finucane--is that correct?
	Ms. Finucane. That's right.
	Chairman Bachus. You were formerly with Fleet Boston, and
	are now the president of Northeast Bank of America.
	Ms. Finucane. That's right.
	Chairman Bachus. And Mr. Joseph P. Campanelli.
	Mr. Campanelli. Yes, sir.
	Chairman Bachus. Chief operating officer of Sovereign Bank,
	New England Division, and Vice Chairman of Sovereign BankCorp.
	Mr. Campanelli. Yes.
	Chairman Bachus. So we welcome both of you.
	As you probably heard the first panel, and I think they
	both referred to some of their discussions with you all, and I
	think were very favorable of some of your activities. So you're
	welcome to this hearing.
	Ms. Finucane, we'll start with you.

	STATEMENT OF ANNE FINUCANE, PRESIDENT, NORTHEAST BANK OF
	AMERICA CORPORATION

	Ms. Finucane. Good morning, and thank you. Thank you,
	Chairman Bachus, Ranking Member Frank and the Members of the
	Committee.
	Can you hear me?
	Chairman Bachus. Bring it a little closer. It won't sound
	natural, but it is.
	He keeps saying I don't sound natural.
	[Laughter.]
	Chairman Bachus. It doesn't do anything about accents.
	Ms. Finucane. Good morning, Chairman Bachus, Ranking Member
	Frank, and Members of the Committee on Financial Services. My
	name is Anne Finucane, and I serve as the president of the
	Northeast region for the Bank of America. Ken Lewis, our
	president and CEO, has asked me to convey his regrets. Since he
	is attending our company's previously scheduled board meeting,
	he was unable to be with us here today. He has asked me to
	testify on his and our company's behalf.
	As a brief preamble, I'd like to state that as a result of
	the merger between Bank of America and Fleet Boston Financial,
	Massachusetts and the rest of the Northeast now serve as a key
	operational base for one of the country's premier financial
	services companies by almost any measure: number of customers,
	number of people employed, distribution, products and services,
	earnings and philanthropy.
	Going into this transaction, we understood the important
	role that Fleet had played in fueling the local economy and
	enhancing the vibrancy of our communities as an employer, a
	lender, an investor, a philanthropic donor, a sponsor, and a
	community partner. As Bank of America, we are committed to
	continuing this important leadership position.
	In negotiating this merger, both Chad Gifford and Ken Lewis
	agreed upon unprecedented initiatives in the area of employment
	and community development as well as philanthropy for this
	region's benefit. Each of these initiatives far exceeds what
	Fleet could have delivered if it had continued on its own
	separate path.
	Now I would like to address the three primary questions
	posed to the Bank of America by the Committee.
	On the question regarding jobs and employment levels, we
	take very seriously our commitment to maintain the premerger
	employment level of 17,900 full-time employees in New England.
	We believe that this, too, is an unprecedented commitment.
	As of October 31 of this year, there were 15,000 full-time
	equivalent employees in New England, representing a loss or
	reduction of 2,900 associates, which essentially covers the
	merger-related lay-offs.
	We recently announced plans to add 400 employees in our
	wealth and investment management headquarters in Boston, and
	another 700 more in Rhode Island, for a total of 1,100
	additional full-time equivalent positions in New England, all
	announced in a four-month period. That puts our New England
	employee total at 16,100 to date, or a net reduction of 1,800
	since the time of the merger.
	We will meet our commitments to the 17,900 employment
	number by 2006 relying on the same approach we have used to
	bring the 1,100 positions I just mentioned back to this region,
	which we announced in the last four months.
	As for our Bank of America associates in the Northeast, we
	offer job opportunities, a comprehensive work life benefits
	program and new employment benefits previously unavailable to
	our Fleet associates. We are on our way to returning to
	premerger levels of employment.
	On Question No. 2 regarding our commitments: Bank of
	America may be new to the Northeast, but like Fleet, the bank
	has a long tradition of growth through mergers. And at the
	heart of our experience is this philosophy: A strong business
	depends on a strong local community and a strong local business
	climate. We believe that we have an outstanding track record of
	putting this belief into action; and just by way of example, we
	are demonstrating our commitment to the Northeast by targeting
	$100 billion of the new $750 billion community development goal
	to this region.
	During the course of developing these goals, we met with
	more than 100 community groups; and much of their input is
	reflected in the development of these goals. A great deal of
	progress has been made; and just to use Massachusetts as an
	example, we have committed to $406 million in loan financing,
	$18 million in grants for the Mass. Housing Partnership, $200
	million in community development loans to the city of Boston.
	We agreed to continue membership in the Federal Home Loan
	Bank of Boston to originate 3,000 mortgages over the next ten
	years with MAHA and to maintain a $20 million plus loan pool
	with the Massachusetts Housing Investment Corporation. And we
	have outlined our community development Massachusetts goals by
	category with an overall 24 percent lift over what we did at
	Fleet in the same time period.
	In addition to our commitments to employment levels and to
	community development, we have committed not just to maintain
	but to increase our charitable giving in support of building
	healthy and vibrant neighborhoods. In 2004, Bank of America
	will have invested more than $9 million in philanthropy and
	community sponsorship funding for Massachusetts alone, which is
	more than we had done in 2003 as Fleet alone, focusing both on
	giving to large and small organizations, including a $1 million
	gift to Children's Hospital, a $1 million gift to City Year,
	$60,000 to the mayor's Main Streets program, and $200,000 each
	to Stride and the Lawrence Community Works program through our
	Signature Neighborhood Excellence Initiative.
	And if there are still concerns, consider this: that each
	bank on its own, Fleet and Bank of America, earned outstanding
	CRA ratings and exceeded our community commitment goals as
	individual banks. Bank of America is the number-one SBA lender
	in the country and the number-one SBA lender to minorities. We
	are the number-one mortgage lender to minorities as well.
	In 2003, Bank of America spent more than $620 million with
	diverse suppliers, and we expect to exceed that goal in 2004.
	Just last week we were named the top corporation for
	multicultural business opportunities of 2004 by more than
	350,000 diverse business owners.
	Finally, on Question No. 3, the adequacy of current laws,
	let me turn to the merger approval process in connection with
	the Fleet/Bank of America merger.
	We filed applications or notices with four federal
	agencies, more than 30 state agencies, several self-regulatory
	organizations, and more than two dozen foreign countries. We
	participated in four public hearings in three different states
	involving more than 200 witnesses, and we responded to nearly
	400 comment letters.
	The approval process spanned more than five months, with
	the last approval received the day before our scheduled merger
	date. Certainly an exhaustive process, but one we can
	appreciate.
	In our opinion, there are adequate measures in place to
	ensure that a bank honors its public pledges. Further, we
	recognize that the more favorably customers view their bank,
	including its role in the community, the more likely we are to
	retain and grow their business. This is a premise underlying
	the way Bank of America has operated across the country.
	In conclusion, I'd like to emphasize one key fact: that the
	new combined bank, the new combined company, enables us to do
	more for the New England region, more for Massachusetts, than
	Fleet Boston Financial could have done as a stand-alone
	company.
	Thank you.
	Chairman Bachus. Thank you.
	[The prepared statement of Anne Finucane can be found on
	page 277 in the appendix.]
	Chairman Bachus. Mr. Campanelli.

	STATEMENT OF JOSEPH P. CAMPANELLI, PRESIDENT AND CHIEF
	OPERATING OFFICER, SOVEREIGN BANK, NEW ENGLAND DIVISION, AND
	VICE CHAIRMAN OF SOVEREIGN BANKCORP, INC.

	Mr. Campanelli. Chairman Bachus, Ranking Member Frank,
	Congressmen Capuano, Tierney, Lynch, and Members of the
	Committee, on behalf of Sovereign Bank New England and
	Sovereign Bancorp, I'd like to thank you for this opportunity
	to speak before you this morning. Along with my written
	remarks, I have provided written testimony for the record.
	During the next few minutes, I'd like to address the
	questions you have posed concerning the acquisition of Seacoast
	Financial Services Corp. with regards to jobs, benefits of the
	acquisition, and commitment to our community.
	Since Sovereign entered the New England marketplace almost
	five years ago, due to the merger of Fleet and BankBoston, we
	have grown organically and through two acquisitions in the
	region: Seacoast Financial and First Essex Corp. Our
	acquisition strategy has been to gain a presence in key markets
	and to better serve our existing customers and prospects.
	Sovereign recognizes the critical importance of job
	creation to the continued development of our communities.
	Putting aside the impact of our acquisitions, Sovereign
	employment levels have grown in Massachusetts by approximately
	4 percent per year. We are proud of the fact that we continue
	to grow our core job base here and anticipate continuing to do
	that in the future.
	Prior to the Seacoast acquisition, we projected that
	approximately 74 percent of the employees would be retained.
	All branch staff and other personnel working with customers
	would be included in those retained.
	We realize the potential hardship the loss of a job can
	have on an individual and their family. Sovereign promised that
	we would consider former Seacoast employees first in filling
	any open positions throughout our company. Following the
	acquisition, we retained 74 percent of Seacoast's positions.
	Those not offered positions received a severance package,
	which includes severance payments, continued health, dental and
	life insurance benefits for up to one year, job training, and
	outplacement services.
	To date, we have placed 20 impacted employees in jobs at
	Sovereign, and we will continue to give former Seacoast
	employees priority in all future hiring.
	There are benefits as a result of the acquisition for the
	former customers and communities. Our customers receive a wide
	array of products and services previously not available to
	them. They have access to additional branches and ATMs; they
	have customer-friendly products, including totally free
	checking for both retail and small business customers; and they
	have additional conveniences of enhanced online banking
	products.
	Businesses also benefit by having access to our extensive
	cash management products, trade finance, payroll and merchant
	services, saving them time and money.
	I'd like to now address the community commitments that
	Sovereign has made.
	Sovereign is proud of our track record of meeting or
	exceeding our commitments. I will also note that Sovereign
	received an outstanding ranking in our most recent CRA
	examination. In all of our acquisitions, we have not exited any
	communities, and we have experienced growth in every market we
	serve.
	Recently we reorganized our management team to get closer
	to communities we serve, with local decision-making and local
	accountability. Every decision that relates to communities in
	Massachusetts is made in Massachusetts.
	Here is a situation where one and one equals more than two.
	Prior to the acquisition, Sovereign and Compass Bank had made
	local commitments totaling $450,000 in charitable giving. After
	the acquisition, Sovereign has committed a total of $600,000
	per year over the next five years, well over the previous
	commitments of the combined banks.
	In addition, Sovereign has made an equity investment of $1
	million in the Southeastern Economic Development Corporation in
	Taunton, exceeding previous bank commitments by 30 percent.
	We had made commitments to Mass. Affordable Housing
	Alliance to originate SoftSecond mortgages to first-time home
	buyers. We have improved our ability to serve those customers
	by locating mortgage originators and agents in offices in
	Roxbury, Massachusetts.
	In an effort to serve more low-income homeowners, we are
	committed to work with the Federal Home Loan Bank and Members
	of Congress to get direct access to affordable housing programs
	through the Boston Federal Home Loan Bank.
	Sovereign has established community advisory boards in all
	the regions we serve. Through them we work collaboratively with
	our communities. We are planning on expanding our boards from
	two to five over the next year. We truly believe that a bank
	needs to listen to the concerns of the community, and must have
	a mechanism in place, such as advisory boards, to address those
	concerns.
	Sovereign is proud of its record of being in and of the
	communities where we live and work. We look forward to
	continuing to provide exemplary products, programs and services
	which will strengthen our customers, our community, in turn
	strengthen Sovereign Bank.
	Once again, thank you for inviting me to speak before you.
	I'm happy to answer any questions you may have.
	Chairman Bachus. Thank you.
	[The prepared statement of Joseph P. Campanelli can be
	found on page 110 in the appendix.]
	Chairman Bachus. Ms. Finucane, what new benefits have come
	to consumers of Fleet Boston? What have they gained as a result
	of the merger with Bank of America? And what has the consumer
	response been to the new bank? I know Mr. Campanelli said that
	deposits in the accounts have increased.
	Ms. Finucane. Well, through research, we have discovered
	that more than 20 percent of our customers, the former Fleet
	customers, see the new bank more favorably.
	Chairman Bachus. And pull that mike up, if you would.
	Ms. Finucane. I'm sorry.
	So our customers see our bank more favorably since we
	announced the merger and since they've started to interact with
	us as Bank of America.
	We have increased net new checkings by more than 100,000,
	new checking accounts; same on savings accounts. So I think
	both the economics and the syndicated research would indicate
	that that was favorable.
	Specifically, why do they see it more favorably? I think
	because there is a national network of ATMs and branches that
	they can go to across the country at no surcharge. We have free
	checking, free online bill pay, a better suite of products in
	terms of mortgages, and frankly we can put more money into the
	communities in which we work and live.
	Chairman Bachus. Those are new benefits. And you did
	mention putting money into the community, the $1 million to
	Children's Hospital and others, philanthropic. Has that
	increased, your philanthropic giving?
	Ms. Finucane. Yes. We will increase our philanthropic
	giving. We just made a commitment for the next ten years that
	we will put $1.5 billion into charitable giving.
	So on a combined basis, what we're talking about is, the
	charitable giving Bank of America did, the charitable giving
	that Fleet did, combined, will over time be 40 percent improved
	on that combined basis; and immediately we just saw about a 10
	percent improvement in the last year.
	Chairman Bachus. I see.
	What new benefits have former Fleet Boston employees been
	provided as a result of joining Bank of America, those that
	have retained their jobs?
	Ms. Finucane. First of all, they have greater job
	opportunities, stronger training programs.
	But just to give you two ideas of two specifics, we have a
	home ownership program for our associates that allows--it's
	basically a forgiven-loan program. We give $5,000 to an
	employee toward the purchase of their home, and if they stay
	with the company for five years, we forgive that loan entirely.
	During the course of that five years, they're just paying on
	the interest, anyway. We also have some fee waivers that go
	with that. Tree hundred and nineteen of our former Fleet
	employees have taken advantage of that just since May of this
	year.
	In 2005, we will introduce to the Bank of America program,
	to our Fleet associates, now Bank of America associates, a
	child-care program for lower-paid employees. Individuals that
	make $34,000 or less or have a household income of $60,000 or
	less will get $175 per child per month credit toward child
	care.
	Chairman Bachus. Okay. You know, you're talking about a
	large financial services corporation like Bank of America. How
	are you working to uphold the CRA requirements to deliver
	products and services to the LMI communities on the local
	level?
	Ms. Finucane. Well, thank you for asking the question,
	Chairman Bachus, because I know this is sort of the gist of
	many of the comments made by the community groups.
	First of all, I think we appreciate the fact that Bank of
	America is new to the region; and to Congressman Frank's point
	earlier, sometimes, if it's unfamiliar, organizations can cause
	some trepidation.
	I'd point again to the fact that both banks previous to
	this merger had outstanding CRA ratings. I would point out that
	both banks previous to this merger made commitments and then
	exceeded them in terms of the total goals.
	I would say that--and the community groups are aware of
	this--we have taken $750 billion. We've broken that out in
	terms of the Northeast. For instance, Massachusetts knows that
	the number is $8.4 billion for the next three years. We've
	broken it by category. We've talked to many community groups.
	I really think the gist of the problem that they see is
	they would like a lot of--we will report out on every item that
	they would like to know at the conclusion of a year. First of
	all, we will report out, not only by the state, but by
	metropolitan statistical analysis by each of the categories. It
	will include the LMI information, minority information to the
	degree it's disclosable.
	You also have HUMDA data, you have our CRA filings each
	year, and you have our filings with the SBA. That in total is
	very specific, but it isn't--so we set the goals, and the
	reporting happens at the conclusion of the year. At the
	conclusion of the year, if there are any problems, we get
	together with our community groups and work to solve them.
	Chairman Bachus. Thank you.
	And I think you've targeted $100 billion for the Northeast?
	Ms. Finucane. $100 billion for the Northeast over a ten-
	year period, but that's such a large number. We're trying to
	deal with it now in three-year increments, because I think it's
	much more tangible; and for the State of Massachusetts, it will
	be $8.4 billion, which is a 24 percent lift over what Fleet
	did.
	Chairman Bachus. What is that about the market president
	network working with--what was that? I had read that.
	Ms. Finucane. We have market presidents in each of our
	states, and in fact, using Massachusetts again as an example,
	we have a Massachusetts state president, and then we have
	regional presidents in Springfield, Worcester, Boston and Cape
	Cod. Each of those works with our people in CRA and in
	community development to look over the goals and to make sure
	they're met on a business level.
	It's more than just commitment. You have to make these
	goals with the businesses. You have to reach out to the retail
	group and the middle market group and the real estate loans to
	make sure each of these happen, and they oversee that process
	on a local basis.
	Chairman Bachus. Are you making strong local community
	alliances?
	Ms. Finucane. Yes. As I've said, we've met with more than
	100 community groups.
	Chairman Bachus. Thank you.
	Mr. Lynch?
	Mr. Lynch. Thank you, Mr. Chairman. Anne and Joe, I want to
	thank you both for participating in this hearing. I just have
	one brief question for each of you.
	Anne, I know you've gone over generally some of the
	employment numbers, but could you take me through that again?
	Just where are we now with employment? It seems to be, you take
	one step forward, one back, but I know that's going to
	fluctuate for a little bit.
	And more importantly, what are our projections for, say,
	the next two years going forward with employment?
	Ms. Finucane. Thank you, Congressman Lynch.
	We, premerger, announced--by the way, I use this word
	``FTE,'' full-time equivalent. That sort of eliminates the
	issue of part-time/full-time. About 80 percent of our employees
	are full-time, 20 percent part-time. Full-time equivalent
	means, if there were two part-time employees, they are one
	full-time equivalent.
	So we had 17,900 full-time equivalents, premerger.
	The impact of the layoff in New England was 2,900 full-time
	equivalents. We have already hired back or have announced the
	hiring back of 1,100 of those, so that gets us down to, we
	still have a gap of 1,800. But we've done 1,100 in four months;
	I think it's reasonable to think we can do the next 1,800 in
	two years.
	The way we've done it is, we will look at many things, but
	two primary ways we've gotten back just the 1,100 is by moving
	the wealth and investment management group to Boston. That is
	one of the four major divisions of the company. It has six
	business units that report up to it, but it's one of the big
	divisions of the company. There are four big divisions.
	We've headquartered that in Boston, so we can expect that
	we will continue to grow the population of an employee base
	there, which are very well-paying jobs. We put 700 people,
	actually 700 full-time equivalents, 900 people that we will
	hire in Rhode Island and southeastern Massachusetts in a center
	that we've put down there, a processing call center in Rhode
	Island. So I think it's the combination of those kinds of
	initiatives: growing business and then bringing business here.
	Mr. Lynch. Just one follow-up.
	I know that Maureen Flynn had mentioned in her testimony
	that we had one CRA specialist from Bank of America to handle
	both Massachusetts and Rhode Island.
	Ms. Finucane. Right.
	Mr. Lynch. Is there any chance that we might be able to get
	another person hired to take care of Massachusetts, one person
	handling Rhode Island?
	Ms. Finucane. Well, she's talking about a relationship
	manager. We actually have about ten people that handle the
	territory in the areas of tax credit or lending or mortgage
	origination. So she was talking about a relationship manager.
	I think what's reasonable is that we look at those ten
	people and see if there's a better distribution in terms of
	relationships.
	There was also an issue, I know, that Florence raised with
	lenders in Boston for the SoftSecond program. We agree with
	that, and we're in the midst of hiring.
	Mr. Lynch. Terrific. Thank you very much.
	Joseph, if I could ask you, could you elaborate a little
	bit on the plans of Sovereign Bank post-merger to meet or
	expand its CRA commitments in struggling communities? I've got
	a few of those. And also if there are any job-enhancement
	possibilities specifically for people living in those
	communities.
	Mr. Campanelli. Yes; thank you, Congressman.
	Many of the discussions we had in our community advisory
	group is how we can do a better job. One of the things that
	came out of those discussions is a need for us to better
	deliver our bank products to all of our communities.
	The catalyst behind our reorganization was to put senior
	executives in those communities that can make decisions and are
	held accountable for the entire bank product distribution,
	whether it's CRA, consumer, small business, or general
	corporate banking.
	That has really allowed us to find opportunities, such as
	Roxbury Technology, where they had a struggling company; had a
	great opportunity to provide products to Staples. We partnered
	with Staples, provided a working-capital line. Ten new jobs are
	added in Roxbury, and we believe that's only the beginning.
	It's a model that we're looking to expand throughout all our
	footprint.
	We're so supportive of it, we've actually moved our entire
	purchasing relationship from a current provider to Staples,
	because we feel Staples gets it. They want to look at ways you
	can do a better job of creating jobs in the city tied to
	affordable housing.
	It really is an integrated approach on how we work with the
	community groups that are out there, the development agencies,
	some of the state and local programs, and with our own team
	members in those markets, making a difference.
	Mr. Lynch. Thank you, Joe; thank you, Anne.
	Mr. Chairman, I thank the Committee for your courtesy to
	me. I do know that Senator Nuciforo and also Representative
	Quinn are going to testify on the next panel. Unfortunately I
	have to be somewhere else, but I will follow up on both of
	those legislators after the hearing, after their testimony; so
	we'll touch base then. Again, thank you, Mr. Chairman.
	Chairman Bachus. Thank you.
	At this time, I recognize the Ranking Member.
	Mr. Frank?
	Mr. Frank. Thank you, Mr. Chairman.
	I want to say, as I said before, there has been unusually
	good testimony from all of the witnesses, and I appreciate it.
	I want to comment particularly on the choice of one
	witness. There was one report that somehow the fact that Ms.
	Finucane was testifying instead of Mr. Lewis was a problem for
	the Committee. Quite the opposite is the case. It would be very
	odd if we were simultaneously to complain that there was not
	enough local input, and an objection when we got it.
	[Laughter.]
	Mr. Frank. The fact is that Ms. Finucane has been, I think,
	a very important player in understanding. And she's in the
	middle; she's conveying messages both ways. There was no
	problem at all, it seems to me; in fact, I think it is
	preferable.
	We've had a chance to talk to Mr.Lewis; people seem to have
	forgotten, those who commented on that, that Mr.Lewis made a
	special trip up here in September when we were particularly
	distressed about employment. He visited Representative Quinn,
	Senator Nuciforo, Representative Capuano, myself and
	representatives from the offices of my colleagues; so we regard
	this as an entirely legitimate and useful approach.
	Let me say, here is the situation with Bank of America. We
	have a major national economic entity entering this region.
	They come in, and they buy up what had been a major regional
	entity.
	That's a fact that inevitably gets people nervous. It
	doesn't mean anybody's a bad guy or a bad woman; it's just
	that's the kind of thing that happens.
	It also, though, is very important. Clearly, we're going to
	have to learn to live with each other. I think we ought to be
	ready to do that. People have said, well, you know, if it was
	up to us, Bank of America wouldn't be coming in here.
	Well, if it was up to some people at the Bank of America,
	maybe I wouldn't be in office.
	[Laughter.]
	Mr. Frank. I mean, we didn't pick each other. But in the
	interest of the people we serve, some of us in the electoral
	process, and others through the economic process, we're going
	to work together. There will be some bumps and grinds, but I
	think we are moving forward, let me say; and I think it's
	important to both give credit where it's due, but then complain
	where you haven't been satisfied.
	With regard to housing, Bank of America has been extremely
	responsive. We've already noted that with the Massachusetts
	Housing Partnership cashing out, there was a state obligation
	that they find some money, but they turned that into a cash
	grant at our request, and that was helpful.
	Same thing with the affordable housing program, they took
	strides to do that; working with the Mass.Affordable Housing
	Alliance. Ms. Finucane just acknowledged that they need to do
	better in Boston, and we look forward to that.
	On the other hand, there have been some unsatisfactory
	conversations elsewhere, and I must say--maybe it's a cultural
	difference--why there is resistance to appointing a state
	advisory board, I do not understand.
	I must tell you, give you a little free political
	consulting advice. If I could make some people who were unhappy
	happy by appointing an advisory board, you'd have that board
	appointed in about a minute and a half. I never heard of
	anybody that ever died from having an advisory board.
	And the fact is that I would hope people would understand,
	you're talking about constructive people. These are not barn
	burners; these are people who are thoughtful, who understand
	economics, and I think it is important to note that in all the
	differences, neither side has accused the other, it seems to
	me, of being economically unrealistic. So I would hope we could
	work within that framework.
	I then want to turn to the jobs question. Now, that's been
	important for both banks, and that was one of the issues that
	we talked about.
	Housing, I think everything is good. In some of the other
	areas, we still have some concerns and some further work to be
	done; and I think the request for specificity, I would say to
	the Bank of America, is a perfectly reasonable one.
	But let me just touch on race. This is one of the
	advantages of Ms. Finucane. Anybody who has lived in Boston for
	the last twenty years or more knows we've had this terrible
	situation with regard to race. That is significantly improving,
	and a lot of us have worked to improve it.
	But there's a residual tension, and anybody who approaches
	the race situation in Boston shouldn't be surprised when there
	is a show-me attitude, a demand for specificity, because it's
	part of the heritage that we're all working to overcome.
	Then the other area is employment. I was disappointed, and
	said so in September, when I thought that job losses were
	coming that had not been anticipated. I agree that since
	September, with the three announcements, first moving wealth
	management here, then opening the call center in Rhode Island,
	which is near my district, in southeastern Massachusetts, as is
	my colleague Representative Quinn from there. The city of Fall
	River, for example, is in the Providence SMSA. So when you put
	good jobs like that in East Providence right next to
	Massachusetts, you're doing a good thing for southeastern Mass.
	as well. I appreciate that.
	I think we also ought to be clear, there was no legal
	requirement that Bank of America pledge to keep its employment
	commitment. That was something that they did and we were
	pleased to see. Some of us would have been more critical. I
	cannot say that the landlords here in this institution, the
	Federal Reserve, would have paid a lot of attention to us. I
	mean, if we had been disappointed in the job thing, I must tell
	you that it is not my approach to say, well, these guys don't
	like it; that's the end of that merger. But we do have that. It
	is important.
	So I appreciate the steps that have been taken to begin to
	move jobs back, and I guess I want to say, at this point I am
	confident that Bank of America means what it says. Obviously--
	and I think it's a year from now we're talking about, January
	of 2006, is that the date that we said by which there would be
	the equivalency?
	Ms. Finucane. Well, 2006 in----
	Mr. Frank. Not necessarily January? Sometime in 2006?
	Ms. Finucane. It's reasonable to expect that we would,
	before the middle of 2006----
	Mr. Frank. Obviously, that's going to be critical to the
	relationship. I must say, if we can get back then, then there
	will be some--I think that will be, as I said, very helpful to
	the relationship.
	We did have, with regard to Sovereign, an inevitable job
	loss because of Seacoast. With Sovereign, there was much more
	overlap. I guess one of the reasons we were concerned, we were
	surprised to some extent, there was no Bank of America/Fleet
	overlap; Sovereign and Seacoast had a considerable overlap. But
	I do appreciate Sovereign's reaching out on the Community
	Investment Act; and as I said, they have been working with us
	in housing.
	Let me just close with one other kind of general comment,
	that I hope my friends in the banking community will listen to.
	I'm not going to talk about your bonuses this time; I did that
	last week in New York.
	But the question we have is this: Clearly, the merger,
	Sovereign buying up Seacoast, Bank of America buying up Fleet,
	those are in the interests of the overall economic efficiency
	of the country; and I believe that they are.
	Productivity goes up. Technology and globalization, all
	those things, argue for these kinds of mergers. But we have
	this problem in this country. Alan Greenspan said in April of
	2004 that the good news was that productivity was going up, but
	he noted--this is to the Joint Economic Committee--that all of
	the gains from the increased productivity were inuring to the
	owners of capital, and none were going to compensation paid in
	the form of wages. I don't think that is sustainable in terms
	of equity, and I don't think it's sustainable economically.
	We're now looking at retail job figures for this holiday
	season, and what do we see? The luxury goods are going off the
	charts in the upper direction, and the bottom is falling out of
	some of the low-end.
	Now, I must say, I tell my colleagues, the fact that Wal-
	Mart isn't doing well doesn't cause me any great heartburn, for
	reasons of their antisocial approach in so many ways. But
	economically, here's the problem: The inequality in America is,
	I think, beginning to have not just negative social effects,
	but negative macroeconomic effects, because you cannot sustain
	an economy where a large number of people don't have that kind
	of money to do things.
	So that's the context in which corporate responsibility has
	to be explained.
	Yes, I understand that this merger, that this purchase by
	Bank of America of Fleet, the purchase of Seacoast by
	Sovereign, these are in the overall macroeconomic interests of
	the country; but we cannot continue to ignore the distributive
	effects, because that's neither socially acceptable nor, I
	think, economically useful.
	So that's why we say to Bank of America, please try to
	maintain this economic situation, the job situation, because
	it's not simply what it does to the bottom line or to the gross
	domestic product that counts; we need to have some concern
	about equity.
	As I said, I just hope that it will be understood in this
	context. Nobody up here disagrees with the important role that
	banks play in our free market system, but we hope that we would
	get a significant understanding that increasing productivity
	and enhancing the profitability of stockholders by itself is
	not enough; and if that's all that happens, you're going to see
	a movement in the country towards a kind of economic disparity
	that, as I said, I disagree with in terms of values, but I
	think has some economic negatives.
	Mr. Chairman, I've overused my time. I appreciate the
	indulgence.
	Chairman Bachus. Thank you. I would like to confirm that
	when you're disappointed, you do say so. I think that's partly
	a Massachusetts thing.
	[Laughter.]
	Chairman Bachus. Mr. Capuano?
	Mr. Capuano. Thank you, Mr. Chairman. I wasn't disappointed
	in the baseball scores this year, so that's about it.
	Mr. Chairman, I have a few questions. Before I do, I want
	to echo what Barney said about Ms. Finucane. She has a great
	reputation. We're looking forward to her running this bank.
	And I'm hoping that things smooth out because of your
	knowledge of the region and the different culture that we may
	or may not have. I have no proof whether we do, but I know our
	culture, you know our culture; if it is different, I'm hoping
	that they listen to you.
	I'd also like to thank Mr. Campanelli. Again, as I said
	earlier, I think Sovereign is one of the banks that has
	understood that. They're not a local bank, and I think that his
	predecessor, Mr. Hamill, and Mr. Campanelli both have brought a
	knowledge of the region that their bank has heard. As I said
	earlier, I think with the Bank of America, the test is still
	out.
	I just want to say for myself, the things I've been most
	concerned with this merger are the lack of details that people
	can look at and say, okay, this is what we can expect. If we
	don't like it, fine; I can see a reason people will disagree,
	and some people will never be satisfied. I may even be one of
	them. But without detail, there is nothing but questions and
	distrust; and for me, that's been the biggest issue.
	Part of that lack of detail has also been the suspect
	timing of some of the announcements that may or may not have
	happened otherwise. The fact that it just so happens you
	announced 300 jobs here in Massachusetts last week when we're
	having a hearing, it's nice, but it does raise questions. And I
	wonder, do we need to have a hearing every week to get good
	news?
	And the fact that we just get a three-page strategic
	business plan this week, again, it's a nice plan, it's a good
	beginning; but do I have to have a hearing next week to get the
	details?
	So for me, it's not so much that I'm capable--I think
	anyone here is capable of questioning the substance or the
	motivation, as much as we're not sure; and it just seems to
	have taken a long time to make progress on that issue.
	And I guess most notably, and I know that you've heard my
	questions in the past, when it comes to the employees, I
	understand that when mergers happen--I think we all do--in the
	real world, that people lose their jobs. We know that. We
	understand that. We understand the result of it.
	But what I'd like to ask now, as I've asked in the past,
	without getting down to every single individual job, can you
	tell us right now, are the bulk, the major, the 99 percent of
	the merger-related layoffs, are they done, or do we have more
	to come?
	Ms. Finucane. They're done.
	Mr. Capuano. Thank you. I think that's important for the
	employees to know, especially in this season, for them now to
	go to Christmas. Understanding that individuals can continue to
	be laid off, and that five people, ten people are not the bulk,
	I really appreciate that statement; and I think had it been
	made earlier by others, that it would be done when we had X
	number, I think that would have made a lot of employees in the
	region a lot more comfortable.
	Relative to the plan that was released last week, I saw
	last Sunday, again, it is a fine first step. The numbers I'm
	not questioning; the intent I'm not questioning. But are there
	plans by the bank to work out more detail, or is that it?
	Ms. Finucane. There are more--should I answer that now?
	Mr. Capuano. Please.
	Ms. Finucane. Yes.
	First of all, in order to meet the goals that we've set,
	you've got to meet with community groups, and you've got to
	work through with them. The production itself, often what
	happens--in the case of MAHA, they helped us with true
	production on the SoftSecond program. In some other community
	development groups, they can help us with true production.
	In many cases, we have to deliver it through our banking
	centers, our real estate, ourselves; and we're looking for
	partnership in terms of identifying those opportunities. That
	goes on, not just when there's a hearing; it goes on every day,
	in every part of our country, including throughout
	Massachusetts.
	I think the real issue is--and we will report on that in as
	thorough a manner as I think anyone could want at the
	conclusion of a year, and that's been the Bank of America
	practice for the last few years. It's worked very well in terms
	of they exceeded their goals; they got an outstanding CRA
	rating. We will do the same here, so that I think the
	specificity will all be there. It isn't prospective; it is
	reported on an annualized basis.
	But that doesn't mean that we're not meeting with every
	community group that we need to meet with in order to create
	that production.
	Mr. Capuano. But does that mean that the three-page
	document that we have, will I see a ten-page document or a 20-
	page document in the next month, six months, some period or do
	I have to wait until we're now working backwards to see whether
	you met those numbers?
	For instance, the questions I asked the last panel, who's
	going to get the money? Where is it going to go? What's your
	definition of affordable housing? How much is going to be
	leased? How much is going to owned?
	All those questions that are really too detailed to deal
	with now, do we expect to see that, or are we going to have to
	wait for various reports?
	And I understand all the reports that banks have to do, and
	that's why they're there. Do we have to wait for all those
	reports to come in, and look retrospectively to say, oh, you
	met them? Or can all the organizations, and more importantly,
	the constituents I represent, who are looking for these things,
	will they be able to say, okay, we know what the bank plans on
	doing this. Are we going to work with the bank to help them
	reach their goals?
	Ms. Finucane. I think it will be clear how to work with us.
	I think that what you're hearing from--and let me use MACDC as
	an example--the specificity in which they would like us to lay
	out by category, by microcategory, prospectively we will not be
	doing.
	What we will be doing, though, is, remember that--and I
	don't mean to sound like a broken record here. Both companies
	had outstanding CRA ratings. Both companies report out by
	category, by LMI, by minority, by region, by MSA, on an
	annualized basis; and then we of course report with HUMDA and
	SBA, which we're the number one SBA lender.
	We're also at 27 percent, I think it is, of LMI mortgage
	lending in Massachusetts. This stuff is going on constantly,
	and we will be working with the community groups to make sure
	that we can meet those goals.
	Our job is to maintain stronger relationships with even the
	people that were here on this panel on a go-forward basis in
	order to create production.
	Mr. Capuano. I appreciate that.
	Mr. Campanelli, my last question. I presume you sat in on
	some of the negotiations relative to Sovereign, both the
	original ones and the renegotiations?
	Mr. Campanelli. The vast majority.
	Mr. Capuano. Did those negotiations hurt you either
	financially or socially or competitiveness?
	Mr. Campanelli. No; and it depends on how you characterize
	negotiations. We viewed them more as conversations, looking at
	where we can do better, what was available within the
	community, and how best to accomplish the objective and the
	goal.
	Mr. Capuano. Thank you very much.
	Chairman Bachus. Mr. Watt?
	Mr. Watt. Thank you, Mr. Chairman.
	I was tempted to pick up on Mr. Capuano's statement and
	suggest that we might have a hearing in Charlotte if we can get
	three or four hundred jobs created there; but I won't go there.
	[Laughter.]
	And Barbara says she wants one in California.
	Mr. Meeks. You can't bypass New York.
	Mr. Watt. Well, you already said New York is the center of
	the universe for banking, so it's not a big thing.
	Mr. Campanelli, I'm going to ignore you for a little bit,
	but it's not because I don't like you.
	Mr. Campanelli. That's quite all right.
	[Laughter.]
	Mr. Watt. It's because you don't have any operations in my
	area, so I'm going to Ms. Finucane here.
	Process: The testimony of the witnesses on the first panel,
	you've made some written commitments. There are some areas
	where you have not made written commitments.
	First of all, where there is no history of an apparent
	transformative effect, as I have the benefit of having in my
	community, do you view it as something that's important to have
	written commitments on other things, and will there be ongoing
	efforts to get to written agreements, commitments, or is it
	just inconsistent with your philosophy, you'll wait until the
	end of the year, you'll report, you'll exceed maybe, probably,
	all of what you might have agreed to do in a written commitment
	if you had agreed to do it in a written commitment; but is
	there a philosophical objection to getting to written
	agreements of some kind?
	Ms. Finucane. First, let me address the issue of the panel.
	We're familiar with the panel and have worked with each of
	the members of the panel in the past, and we will continue to
	work with the members of the panel. We respect their point of
	view. We respect their issues. We think that we can meet the
	need and continue a relationship without a written agreement.
	In the past Fleet has had written agreements. I will tell
	you honestly, in some cases, while we exceeded our overall goal
	of, in our case it was $14.6 billion, in some cases there was a
	written agreement of certain production in a certain geography
	in a certain category that probably over a two-year period we
	should have adjusted, but one gets locked into these written
	agreements, and there's very little flexibility.
	Secondly, Bank of America has had a very good track record,
	without the written agreements, of delivering on everything
	they had laid out. This isn't just rhetoric; it's a matter of
	the record. And it isn't just our record; it's record by
	regulatory bodies and by law.
	So I think that for all of those reasons, we feel pretty
	comfortable.
	I appreciate the fact that Bank of America is new to the
	region, but many of us in this room and that are working with
	the community groups are not new. I think if we were good for
	our word before, we are good for our word now. Also, our record
	shows it.
	Mr. Watt. I'm probably the last person on this panel that
	ought to be trying to pin you down on this, but I'd have to say
	you did a good dance for me there.
	[Laughter.]
	Mr. Watt. Do I take that to mean that there will not be
	additional written commitments? I mean, it sounds like you've
	made a commitment on the second mortgage fund. You've made
	public pronouncements on the lending front.
	Ms. Finucane. Right.
	Mr. Watt. For CRA purposes, where apparently there has not
	been a written commitment of any kind, small business lending,
	employment composition, racial composition, procurement, a
	critically important area; do I understand the bottom line to
	be, there's not going to be a commitment? It's a ``Trust me''?
	Ms. Finucane. No, it's not a ``Trust me.''
	First of all, we have made some commitments. The Bank of
	America has made a commitment to, over the next few years--and
	I'll give you a report card on this year--of reaching a 15
	percent goal of minority procurement.
	This year we were--or 2003, which was the last full year we
	could report on, it's 9 percent. That's 620----
	Mr. Watt. That's a global commitment?
	Ms. Finucane. Nationally. But I'll get to----
	Mr. Watt. That's a national commitment, and what I'm
	hearing from the local folks here is, we can't do this
	globally; we've got to do it community by community. Is there a
	problem with that?
	Ms. Finucane. Well, no; but if I could, in the Northeast
	alone, just by way of example, Fleet had, in 2003, spent $50
	million on procurement with minority vendors. In the Northeast,
	Bank of America did $100 million.
	So I think it's reasonable to expect that we will do better
	as a combined bank than we did as Fleet alone, and that is in
	the Northeast itself.
	In terms of statistical numbers, which I hesitate to refer
	to--and I do have them on a national basis; I don't have them
	for Massachusetts, although we have had conversations with Juan
	at the local NAACP on numerous occasions--our numbers, and this
	is the September filing, our total work force was 68 percent
	women, 42 percent people of color. And to use that, sort of
	another outlook at that, for the vice-president level and
	above, 46 percent were women, and 22 percent were minority.
	So from a global perspective, those numbers are very good.
	I don't have them for Massachusetts in any kind of recent form.
	I need to state that we deeply appreciate the need for
	opportunity for all our employees, and we seek to have a
	diverse work force that reflects the communities in which we
	work and live. That's good for business.
	We have a diversity council; we have a hiring practice that
	seeks a diverse candidate base for almost any job that we have.
	Fifty percent of our people that we've hired in our branches in
	the last two years, 50 percent of them are bilingual. I cannot
	tell you what an effort we try to make in terms of diversity,
	not only in terms of our employment base, but reaching out to
	the community.
	Mr. Watt. I think the concern is, you're talking about
	performance, and other people are asking you about commitments;
	and those people are people who don't have the history,
	necessarily of--I mean, I hope that you will consider, at least
	in the procurement area, and you said there's somewhere written
	down, a 15 percent commitment.
	Ms. Finucane. There is a commitment to 15 percent.
	Mr. Watt. In this area, or globally?
	Ms. Finucane. Globally. But I want to give by example, just
	to use the Northeast, which was in the last few weeks the most
	narrow we could break it down, Bank of America spent
	$100million on the diverse supplier list, where Fleet had done
	$50 million.
	So frankly, it's clearly an improvement and one that I
	think will bode well for the future. We're going to do it for
	Mass. Will we do it for each state? I don't think so. Will we
	do it by region? We will try to do that, to give some
	specificity.
	In terms of agreement, just a final thing. Sometimes this
	is an issue of language. Each of the people that we deal with
	in terms of community groups, in essence, there's a form of an
	agreement with many of these groups because the community
	groups help us deliver on our promises. But it's a focus on
	production rather than a prospective ideology.
	Mr. Watt. Thank you.
	Chairman Bachus. Mr. Meeks?
	Mr. Meeks. Thank you, Mr. Chairman. I'll be brief, and I
	think I'm learning from some of the Massachusetts people here.
	All politics is local, and I don't know whether you're equipped
	to answer these questions. Just a couple questions real quick
	now, but they're going to pertain to New York.
	Ms. Finucane. Okay.
	Mr. Meeks. I understand that Bank of America is in the
	process of building a large tower in Manhattan very shortly.
	Ms. Finucane. Yes.
	Mr. Meeks. So my question is, do you know whether or not
	Bank of America has, or will have, a minority business
	component to go along with the construction of that building,
	where there will be minorities that will be involved on the
	construction phase of the building?
	Chairman Bachus. I thought he was going to ask for two more
	stories on the building.
	[Laughter.]
	Ms. Finucane. Well, we are not responsible for the actual
	construction of the building. That is--I forget the name of the
	firm. I'm sorry; I don't recall the national developer's name,
	but we are not handling the construction of the building.
	Mr. Meeks. But they're contracted by you? It's been my
	experience in New York, any time we've had a major corporation,
	for example, with American Express, after 9/11 they were
	redoing their building, and there was another contractor, but
	they told their contractor they wanted to make sure that there
	was a minority business component of the construction of the
	building. Because again, it reflects upon them.
	Ms. Finucane. Right.
	Mr. Meeks. So I'm wondering if there's a similar type of at
	least a direction in which the Bank of America is moving with
	reference to this construction of this large tower.
	Ms. Finucane. Well, we certainly support opportunity, and
	given that we're neither doing the construction nor are we the
	developer of it, we're a few sort of businesses removed; but I
	will look into that. I'm sorry; I just can't----
	Mr. Meeks. I understand. Please look into it, because I can
	tell you that a number of us, we'll be reaching out to you, but
	we'll also be reaching out to the contractor.
	Secondly, the local concern that I have, Fleet had a large
	presence in my district, and was doing a number of things
	there, had a number of individuals that were employed there. I
	think totally, though, Bank of America at the time only had
	about 40 to 43 people that were employed in the district.
	I was wondering whether or not, with the merger, whether or
	not Fleet will be looking to do additional business in a
	district like mine--I'm in southeastern Queens, which is
	basically really kind of a middle-class community. So I was
	wondering whether or not there's any plans to expand in
	communities like mine since this merger, but particularly since
	Fleet had such a large presence within the district.
	Ms. Finucane. Well, Bank of America has not only the
	capacity but the desire to build out in New York City in a more
	aggressive way than Fleet would have been able to do. So we
	have already opened six new banking centers in the Manhattan
	area; we're looking at other opportunities throughout New York
	City.
	I can't speak with specificity about your district, because
	I don't know whether we have a banking center planned; but I
	can tell you that we are looking to expand our presence in New
	York. Unlike New England, we do not have a number-one presence
	in terms of market share in New York, and we're eager to get
	there.
	So I think that we would be most anxious to continue a
	dialogue with you.
	I know that you can expect that in terms of employment
	levels, philanthropy and community development, those will all
	improve in the next months and years to come.
	Mr. Meeks. Very good. I definitely would like to have that
	discussion, because unfortunately what has happened--and Fleet
	was the one that was really kind of taking up some of the
	slack--there was not the kind of presence given the economic
	impact that the community had, particularly on a commercial
	level with commercial development in the community. So I would
	love to be able to follow up with you to have a conversation
	with regards particularly to southeastern Massachusetts and
	Queens.
	Ms. Finucane. Thank you.
	And Congressman, I would like to address a comment you made
	earlier in your questioning of the community groups about
	financial literacy. Just as an example, we've put more than $6
	million into the issue of financial literacy. I think that most
	financial institutions, I'm sure Sovereign agrees, all of us
	feel that we need to do more in the area of financial literacy.
	Mr. Meeks. Thank you for that, and I'll be looking for you
	to come and help out some of our schools in southeastern
	Queens. Thank you very much.
	Chairman Bachus. Ms. Lee?
	Ms. Lee. Thank you very much. Thank you, Ms. Finucane, for
	your testimony.
	I'm glad to hear of the $100 billion commitment here as it
	relates to CRA. I'm trying to reconcile what I heard from Mr.
	Cofield in terms of, it seems like there's some disconnect
	here. He indicated that he only heard and had some refreshing
	discussion very recently, last week, with regard to what is
	taking place and what the plans and commitments are.
	So again, going back to associating itself to Mr. Capuano's
	remarks, what is it going to take? The NAACP is a very
	important organization, and if they have only had recent
	discussions, what can we do to make sure that those discussions
	are real and continue? That's the first part of my question.
	The second is, you mentioned that Bank of America is the
	number-one mortgage lending institution to minorities. Could
	you verify that for California for me, please? Because from
	what I remember, the last report that I saw was very dismal in
	terms of B of A and its lending to minorities; but I may be
	wrong. I'd like to verify that.
	And thirdly, with regard to minority and women-owned
	businesses--I was a former small business owner; I was in
	business eleven years prior to coming to Congress--and just
	listening to Mel Watt and talking about written agreements, I
	had to have written agreements for everything I did;
	everything. There was no way I could function without a written
	agreement. Not just contractual, but every move I made had to
	have a written agreement. But I guess the rules are a little
	different for the small businesses.
	But I'm looking at the breakdown that you provided
	subsequent to Congressman Frank's request with regard to
	minority and women owned businesses, and I want to ask you, is
	this a national chart that you provided? You had 511 African-
	American suppliers, 59 Asian-Indian----
	Ms. Finucane. Yes.
	Ms. Lee. That's national.
	Ms. Finucane. Yes.
	Ms. Lee. And 519 Hispanic. Last year is 9 percent?
	Ms. Finucane. 2003.
	Ms. Lee. 2003 is 9 percent, and you're hoping to get to 15
	percent next year?
	Ms. Finucane. Actually, no; I think it's in 2009.
	Actually, in 2004, my guess is that our number, our
	percentage, will look lower, because the denominator will be
	higher, because we'll have the combination of Fleet and Bank of
	America. So the actual dollars spent with minority suppliers
	will go up; but because the denominator is bigger, the
	percentage will look slightly lower.
	Ms. Lee. It just looks like a very small number of
	suppliers that you have nationwide, so I'll be very interested
	to see the dollar amount. Maybe the dollar amount doesn't
	support an additional pool of minorities.
	Ms. Finucane. It is 625 for 2003.
	Ms. Lee. 625----
	Ms. Finucane. Million.
	Ms. Lee.----million? Out of what, in terms of total
	suppliers.
	Ms. Finucane. Out of the base, I'm sorry; I don't know. We
	could provide that to you.
	Ms. Lee. Could you provide that for us, please?
	Ms. Finucane. I can provide to you in terms of where we
	stood in terms of mortgage lending in California. In
	California, we're number three.
	Ms. Lee. You're number three in California?
	Ms. Finucane. Yes.
	Ms. Lee. Do you have the breakdown in terms of the
	percentages.
	Ms. Finucane. I don't here today.
	Ms. Lee. Would you get that?
	Ms. Finucane. Sure.
	Ms. Lee. Because I just want to verify this, because the
	general--and again, it's based on the report we saw several,
	about a year or two ago, the numbers had seemed to be, for
	African-Americans 2 to 3 percent.
	Ms. Finucane. Okay; we'll look into that.
	Ms. Lee. It was very low.
	Ms. Finucane. I do want to speak to Mr. Cofield's remarks
	insomuch as I'm sorry you only found them productive in the
	last week or so, but we have had conversations for the past
	year through the local NAACP and then an association, a
	coalition that's associated with it. So the dialogue continues.
	Ms. Lee. I think his point was, though, it was not a
	definitive dialogue; it was finally beginning to become a
	dialogue.
	Ms. Finucane. Right. Well, I appreciate that.
	Ms. Lee. Thank you very much.
	Chairman Bachus. Thank you.
	Mr. Tierney, it's your time to wrap up and summarize.
	Mr. Tierney. Thank you. I feel a little bad for Mr.
	Campanelli here, but I don't think he feels too bad about it.
	[Laughter.]
	Chairman Bachus. I haven't heard him complain.
	Mr. Tierney. I haven't heard him complain, either; and I'm
	not going to break the pattern here.
	It's safe to say that the folks that Sovereign has working
	up in the northeastern part of the state certainly are doing a
	great job, and we appreciate that, both with the local and
	small business community and the community at large; so thank
	you on that.
	Ms. Finucane, I just want to nail down some aspects. It
	looks to me, or sounds to me, as if the concern that Bank of
	America has about specificity is that there will be some
	resulting litigation, or if not litigation, confrontation about
	not having met specific exact details down there; that you feel
	you can meet general firm things, but geographically there
	might be a little difference in the way things result or things
	like that. Is that part of the hesitation?
	Ms. Finucane. No. Really, the hesitation is that I would
	say we would like some flexibility, because what happens--I
	don't think it will be litigation, by the way. It's a matter
	of, you seek some flexibility so that as you see opportunity,
	you can take it. And I don't mean just----
	Mr. Tierney. I hear you, but can't you--how is it that
	Citizens can do it and Sovereign can do it, and the Bank of
	America can't come up with some sort of a written agreement
	setting forth specific goals with some flexibility in it? I
	think you've got smart lawyers and negotiators.
	Ms. Finucane. I think we have it. Our written agreement is
	that we will do $750 billion; $100 billion a year and $8.4
	billion in the next three years in Massachusetts----
	Mr. Tierney. I think you know what I'm saying. It's not
	specific in terms of what the advocacy groups are looking for,
	nor even reasonably in that direction. Apparently Mr. Cofield
	felt that you didn't get to the national global figures until
	last week; so while you may have had a lot of conversations
	over the period of time, you're just getting to the global
	figures. There's some frustration that I sense on that, that
	you couldn't have gotten there sooner and down to a more
	specific level locally here at a quicker pace.
	Ms. Finucane. I appreciate what you're saying, Congressman.
	We did provide these global numbers before. I think he was
	speaking about more specificity in terms of a relationship
	going forward, and an advisory role that he feels that the
	local NAACP could play. So I think he was speaking more
	specifically. The numbers have not been unclear.
	Just to repeat, I'm not being--this isn't rhetoric. We have
	broken it by state, by category within the state, and the
	difference between what our previous commitment was and our
	current commitment, and what improvement that would be. I think
	we have a game plan for how we will get there.
	What we haven't done is given, by category, a prospective
	by category, by geography, some of the categories that some of
	the community groups would like; and they're not all in
	agreement on what they would like.
	Mr. Tierney. I understand. Is there any other aspect of
	your business that you don't look prospectively forward and set
	out some written goals with a certain degree of specificity?
	Ms. Finucane. We have written out prospective goals with
	specificity. I think the disconnect is the kinds of commitments
	and the kinds of reporting they would like us to do. We want to
	report it at the end of the year----
	Mr. Tierney. Well, that wouldn't be very prospective.
	Ms. Finucane. But the prospective is that we've laid out
	the categories, the increase in the categories, and the
	fundamental ways that we will get there.
	Mr. Tierney. And they want?
	Ms. Finucane. They want greater specificity. They basically
	want--I think to be fair, using retrospectively what we've seen
	other banks do or that we've done ourselves, it's very
	cumbersome. If you're doing it--the amount of money we will
	spend in these categories far outweighs what any other bank in
	the region will spend in these categories.
	Mr. Tierney. Have you seen the models that the witnesses
	have talked about in terms of what Sovereign has done in
	reaching an agreement with them?
	Ms. Finucane. No.
	Mr. Tierney. Maybe it would be instructive to take a look
	at that and see if there's some objection that Bank of America
	has that you couldn't get close to that model. It seems to me,
	if other banks can do it, then--and not having looked at it for
	Sovereign Bank, Bank of America objecting to something they're
	not even clear on what it is that they might accomplish and
	might get to some point of agreement with.
	Ms. Finucane. I think we'd be happy to look at those. We
	certainly have in the past with Fleet, and so has Bank of
	America.
	I just would repeat, it isn't as if we're talking about two
	banks that haven't done well at this.
	Mr. Tierney. No; and please, I don't mean to interrupt.
	You've said that over and over again, and I think everyone in
	the room gets the point.
	Ms. Finucane. I hope so.
	Mr. Tierney. I hope so, too. But I don't know if Bank of
	America is getting the point----
	Ms. Finucane. I think we are getting the point.
	Mr. Tierney.----that it is quite possible to do a
	prospective agreement with more specificity than it has.
	And now, to get back to the original point, is it attitude,
	or what is it that makes the bank so stubborn in saying it
	doesn't want to get to that point?
	Ms. Finucane. It's not attitude. It's a matter of, in terms
	of good business--I think the thing is, in terms of the
	agreements, there are many organizations we will do very
	specific agreements with in order to produce the results that
	we need.
	These are coalitions of community groups that want various
	steps to be taken, various iterations on the reporting. You
	spend a lot of time doing that and maybe less time doing the
	production, and when you produce much more than any other
	company can do, I think there's a value to that, too.
	Mr. Tierney. Did you have those kinds of agreements with
	Fleet and these organizations?
	Ms. Finucane. Yes.
	Mr. Tierney. So it's not impossible to do it; you've done
	it before?
	Ms. Finucane. Right.
	Mr. Tierney. Can you explain for me the reasons, what went
	wrong with those agreements that would encourage you not to
	want to enter into them as Bank of America?
	Ms. Finucane. I don't think it's a matter of what went
	wrong. This is a different business model.
	Mr. Tierney. In what way?
	Ms. Finucane. The different business model is that we will
	lay out our goals, we will----
	Mr. Tierney. Without specificity?
	Ms. Finucane. No, I think there is specificity. I think
	that we do have more specificity than you're appreciating here
	in this room.
	Mr. Tierney. Do you have more specificity, in Bank of
	America's view, than you did when you had Fleet?
	Ms. Finucane. No.
	Mr. Tierney. And you say that your new business model
	prohibits you from getting the kind of specificity you had in
	the Fleet agreements.
	Ms. Finucane. No, I don't think it's a matter of
	prohibiting. I think it's a matter of, we feel we can deliver
	on this. We think that in working with the community groups, we
	will meet and exceed our goals; and we will have a track record
	from both companies to have done that.
	Mr. Tierney. Thank you.
	Chairman Bachus. Thank you. I appreciate it, folks, your
	testimony.
	Mr. Campanelli, is there anything you'd like to add?
	Mr. Campanelli. No; I appreciate the opportunity to speak
	before the Committee, and it's really the results of all our
	team members that allows us to accomplish what we've done. We
	look forward to continue being a responsible corporate citizen.
	Thank you.
	Chairman Bachus. Thank you. I appreciate both your
	testimonies. Very instructive.
	Ms. Finucane. Thank you.
	[Pause.]
	Chairman Bachus. At this time we will reconvene with our
	third panel, which is made up of elected and state officials.
	This time, Mr. Frank is going to introduce the third panel.
	Mr. Frank. Thank you, Mr. Chairman. I'll do it in the order
	that they're seated.
	First is Representative John Quinn, who is someone I work
	very closely with, both on banking issues, and also he is in my
	district and is a great expert on fishing law. So John Quinn
	has been a great representative of the fishing industry, and
	I'm glad to have him here.
	Next to him is Senator Andrea Nuciforo. People should know,
	in Massachusetts, the legislative committees are joint
	committees; and they are co-chairs of the Committee on Banks
	and Banking, is it still called, in Massachusetts. Senator
	Nuciforo represents western Massachusetts, and between them
	they have a very distinguished record, including the passage in
	Massachusetts of, I think, a very good predatory lending law
	that I hope we will take a look at. It's close to the law of
	South Carolina, and I think serves as a good national model.
	Finally, Commissioner Steven Antonakes, who is a bank
	commissioner. We have a very strong commission in Massachusetts
	of bank commissioners who have been both fully appreciative of
	the importance of the banking industry and respectful of the
	rights of consumers. I understand how they go together, and
	Commissioner Antonakes has continued in that tradition, so I
	very much appreciate them.
	We have, of course, Massachusetts laws that are applicable.
	One, in fact, that has been alluded to--and people should be
	clear it's a Massachusetts law--when there have been various
	references to the $18 million that Bank of America put into
	this entity known as the Massachusetts Housing Partnership,
	that's pursuant to a Massachusetts law which says that if you
	are going to have this change of ownership, a certain
	percentage of the assets have to be made available for
	affordable housing. It's been a very useful law and has
	produced a good deal of money. Sovereign obviously complied as
	well.
	So I am very grateful to these three gentlemen for joining
	us.
	Chairman Bachus. Thank you.
	Having been a Member of the State Senate of Alabama, I am
	aware that being a State Legislator is a demanding and
	difficult job. In many respects, it's more difficult than being
	a Member of Congress, so I commend you with the job you're
	doing.
	At this time, we will start with Mr. Quinn.

	STATEMENT OF JOHN F. QUINN, REPRESENTATIVE, MASSACHUSETTS STATE
	HOUSE

	Mr. Quinn. Thank you very much, Mr. Chairman and the other
	Members.
	I first want to thank you as well as my Congressman,
	Congressman Frank, for being at this hearing here and the fine
	work you do. Particularly, as Congressman Frank said about my
	fishing connections, not only does Congressman Frank do a lot
	of work on the banking and financial services; he does a
	tremendous job on behalf of our area of the state.
	Obviously, it's been a long and busy day, and a long and
	busy year in Massachusetts and the country regarding mergers
	and acquisitions; and unfortunately, I think there's really no
	end in sight. In Massachusetts there's over 300, or 200 banks
	here and certainly the bigger-is-better strategy of banks. I
	think the issues we're discussing today are not just
	appropriate for today, but for five years and ten years and
	twenty years from now. It's great and very important that we're
	here.
	I think it's important to distinguish between really two
	types of mergers. We're fortunate, or unfortunate, to have had
	both those types in Massachusetts.
	One, the mega-merger, where I would put the B of A/ Fleet,
	in which it's got statewide implications. They've got branches
	all across the state; and if there's going to be some negative
	impacts, they're balanced and spread out across the entire
	State.
	The second is one such as the Sovereign/Seacoast, which
	occurred in my district and Congressman Frank's district, which
	is a high concentration of impacts. And I must say that in the
	Sovereign issue, over 300 jobs were taken out of the center of
	our major city of New Bedford, as well as the closing of 12
	branches.
	Through that process and through participation in those two
	hearings in Massachusetts, I think I've learned, I think, that
	there's two or three holes in the approval process in the
	state, which is actually quite similar to the federal approval
	process. So the remarks I'm going to make are going to be
	applicable to both the state and federal approval process.
	Number one--and we've heard it time and time again--not
	enough information provided at the approval hearing with not
	enough specifics. And I want to compare and contrast the
	Sovereign versus Bank of America mergers.
	The Sovereign merger, I'm amazed I'm actually going to
	compliment them for laying off 300 people in my district; but
	the issue of process, days before the merger, hearings
	occurred. They had a plan to lay off 300 people, they had a
	plan to close twelve branches; but they also had a plan to
	retrain people and put them into other jobs in the system. They
	came actually to downtown New Bedford in the shadow of the
	headquarters that they were going to close down, and said to
	the people of southeastern Mass., this is what we're going to
	do.
	Did we like it? No. But they were up front, told us what
	was going to happen, and we could plan for that impact.
	Compare that, I think, with the Bank of America hearings,
	in which we've gone around and around and what was said and by
	whom and whatever else.
	I appreciate the statements today, and I appreciate what's
	happened over the course of the last couple of weeks of three
	major announcements of bringing new jobs here, but there was no
	suggestion that there was going to be a several-thousand-
	dollars dip in employment levels in New England that would rise
	again in the first quarter of 2006. I think we all understood
	that that may occur, but I wish it was up front that we were
	told, and we could have planned for it.
	The definitions of what a headquarters means, and what
	customer facing positions mean, those were all talked about
	after the hearing. Sovereign told us about it before; Bank of
	America after.
	And like I say, I want to commend the steps that Bank of
	America has taken over the course of the last couple weeks; but
	I think two things caused that to happen: one, this hearing,
	and the second was the meeting which Congressman Frank and
	Congressman Capuano called for on a summer day in September, in
	the Newton Town Hall, in a hot stuffy room in which the entire
	Congressional delegation was there, and the two of you guys
	said, this is not what you said you were going to do. And lo
	and behold, a couple weeks later, they moved the wealth and
	investment management division to Boston.
	It's unfortunate that had to occur. We're here where we
	are, and hopefully prospectively things can occur and we can
	have a positive relationship.
	But comparing those two approaches, I think it's so
	important up front to get the specificity and the commitments.
	And the second, the two combination issues that I want to
	talk about in closing, there's no mandatory mitigation plan
	required at the state or federal level, and there's really no
	enforcement mechanism for third-party agreements.
	I've written down all the statements that have been made
	here today by Members and by people in the audience: binding
	obligation, non-binding obligation, unenforceable contract,
	local pledges, moral commitment, oral commitment, public
	commitment, written contract, and my favorite one, it's a
	floor, not a ceiling, when they talk about employment levels.
	What's so wrong with writing something down and sticking to
	it, at all levels of this? Is it that bad to write something
	down? You're going to go over to an advocacy group and say, if
	you testify favorably, this is what we're going to do? Is it so
	wrong to write something down instead of using nuances and
	semantics of what a word means? I think not.
	We've heard a lot today about this wonderful program, the
	Mass. Housing Partnership program. As Congressman Frank said,
	it's a state statute in Massachusetts, which I would strongly
	urge you look at the federal level.
	I know the industry says, oh, it's a taking or it's a tax.
	This passed in 1990 in Massachusetts. There have been 33 bank
	mergers in Massachusetts since 1990 with almost a billion
	dollars--one billion dollars--of loans made available through
	this program. It certainly didn't hinder or deter any mergers.
	What I proposed, and Senator Nuciforo and I have filed some
	state legislation, and I would hope you would consider it at
	the federal level, is, have what's good for housing or good for
	economic development, and backfill in the jobs that are lost.
	So there also should be a commitment, not a grant, but act as
	loan money, small business money. So we proposed an entity
	called the Mass. Development Financing Agency, having a similar
	commitment made to them.
	So it's in statute. It's not a nuance or semantic words;
	it's in statute that that money will be available.
	So again, I want to thank you for having this hearing here;
	and in closing, I think it's important that these mergers have
	unique impacts on our communities.
	The distinctive character of banking requires that a
	potential loss due to mergers be given careful consideration as
	to those aspects I talked about. I hope we'll work hard on the
	state level to try and impact those, and I urge you to consider
	in particular that Mass. Housing Partnership, 1 percent or
	whatever it is. $1 billion in Massachusetts ought to be good
	for economic development as well.
	Thank you.
	Chairman Bachus. Thank you, Representative.
	[The prepared statement of Hon. John F. Quinn can be found
	on page 321 in the appendix.]
	Chairman Bachus. And Senator Nuciforo.
	Mr. Nuciforo. Nuciforo. That's how they say it in Rome.
	Mr. Frank. Tell me how they say it in Rome, Georgia.
	[Laughter.]
	Mr. Nuciforo. I don't think I could master the accent, Mr.
	Chairman.
	Chairman Bachus. I'll tell you what: I won't try to master
	yours if you don't try to master mine.

	STATEMENT OF ANDREA F. NUCIFORO, JR., SENATOR, MASSACHUSETTS
	STATE HOUSE

	Mr. Nuciforo. Thank you.
	For the record, my name is Andrea Francesco Nuciforo, Jr.,
	and I hail from the western part of Massachusetts. I serve in
	the state Senate here in Massachusetts, and have served in the
	Senate since 1997.
	For the last five years or so, I have also served as the
	co-chair on the Committee of Banks and Banking. I serve along
	with John Quinn, who just testified. We both serve, and have
	for a number of years now served, as Chairmen of that
	Committee.
	I'd like to thank you personally for being here, and
	certainly to Congressman Frank, who's the Ranking Member, and
	other Members of the Committee. It's wonderful to have the
	hearing here. It gives Members access and the public access to
	this kind of proceeding that we wouldn't normally have.
	I have already submitted written testimony, so I'm not
	going to read that. What I will do is summarize some of that
	briefly and address some of the points that have been raised by
	members of the panel previously and by some of the Congressmen
	that are here.
	We have a pretty good idea about what is concerning
	communities, and the issue is employment. There are other
	issues that we've heard about, housing and CRA and the like,
	but the issue we're here really to talk about is the issue of
	employment.
	We've had now a perspective of going through the '90s and
	now the last four or five years; and we know that when you have
	big bank mergers, you see some pretty big losses in employment.
	We can have lots of discussions about what brings that about,
	but there is some pretty strong evidence that these losses in
	employment are direct results of these mergers.
	I have here in my hand a report. It's an excellent report
	that was done by the Center for Policy Analysis down at UMass
	Dartmouth in southeastern Massachusetts, and it was prepared by
	a professor there named Clyde Barrow. I have a number of copies
	of this available if Members of the Committee would like to see
	it. But this is excellent, and I would like to just quote some
	of the things from the executive summary here.
	This report has to do with the southeastern part of
	Massachusetts, where John Quinn hails from, and this is the New
	Bedford and Fall River area that Congressman Frank represents.
	Between 1993 and 2003, total southeastern Massachusetts
	employment in the banking industry dropped by 31 percent. 31
	percent; those are numbers like what has happened in fishing
	over 20 or 30 years.
	Most job losses in the banking sector are directly
	attributable to mergers and acquisitions over the last ten
	years, and we know what these numbers are in that particular
	area.
	In 1995, when Fleet came together with Shawmut, there were
	179 employees who lost their jobs.
	In 1997, two years later, when Bank of Boston got together
	with BayBank, there were 100 employees who lost their jobs
	then.
	Then two years after that, in 1999, Fleet and BankBoston
	got together, and that year Citizens and U.S. Trust got
	together; and those two mergers combined to cost 500 employees
	their jobs.
	So in four years alone, in that distinct part of
	Massachusetts, some 800 people lost their job; and that's going
	up to 2003.
	2004 came along, and in 2004, Sovereign and Seacoast
	Financial, 350 employees. Fleet Boston with Bank of America,
	we're thinking 500 or so employees. Now, those numbers have
	changed, and I'll talk about that in a minute. And we also know
	that Webster Financial got together with First Fed America down
	in Swansea, and there was a 20 percent job loss there.
	So we know the facts, and the facts are that when these big
	mergers take place in our communities, there are big job losses
	that result.
	Now, while that has been a constant, there's another very
	substantial constant that we know about bank mergers; and this
	is something Congressman Frank talked about not long ago. We
	know there are spectacular executive compensation packages that
	come along with these deals.
	Now, the eye-popping numbers back in '95, when the Shawmut
	deal happened, were $2 million. Those numbers have gone up
	substantially. They're $12 million or $15 million or $17
	million or $20 million executive payouts. Those are good
	numbers; they're big numbers.
	And this, I think, touches on the point that Congressman
	Frank made a moment ago. We know that there are incredible
	efficiencies that are created by these mergers. We know that by
	using automation and using technology, there are big
	efficiencies and the shareholders are rewarded. But we have not
	seen those rewards go to people that are down below, and that
	is my concern.
	It's not surprising, or we shouldn't be surprised to know,
	that when the Federal Reserve Board allowed the approvable of
	this most recent deal between Bank of America and Fleet, there
	was only one passing reference, in a 58-page opinion, to
	employment.
	We shouldn't be surprised, because the Bank Holding
	Companies Act doesn't require that you look at employment. It
	should. Because we've seen these kinds of substantial impacts
	on employment in our communities, I do believe that this
	Committee should act and that Congress should act and that we
	should have an amendment to the Bank Holding Company Act; and
	that amendment should require that, as part of the approval
	process, we should add another factor for the Federal Reserve
	Board to consider, and that factor would be the employment
	impact, short-term and long-term impact on employment in the
	affected communities.
	I'm not going to go on at any greater length, other than to
	say that I'm really pleased that you're here, and that you're
	here to hear from us on the state side, because we have
	watched, as a matter of state law, some smaller mergers; but
	these mega-mergers have had dramatic impacts on our
	communities, and I hope you take into consideration some of the
	comments we've made.
	Thank you.
	[The prepared statement of Hon. Andrea F. Nuciforo, Jr. can
	be found on page 311 in the appendix.]
	Mr. Frank. Mr. Chairman, before we proceed, could I ask the
	others to consent to put that very good report from Clyde
	Barrow into the record.
	Chairman Bachus. Yes, hearing no objection.
	Commissioner?

	STATEMENT OF STEVEN L. ANTONAKES, COMMISSIONER OF BANKS,
	COMMONWEALTH OF MASSACHUSETTS

	Mr. Antonakes. Thank you.
	Good afternoon, Chairman Bachus, Congressman Frank, Members
	of the Committee and staff. My name is Steven Antonakes, and I
	serve as the Commissioner of Banks for the Commonwealth of
	Massachusetts. Thank you for the invitation to testify today. I
	have submitted written testimony which I'll be summarizing this
	afternoon.
	Massachusetts has a longer history than most in
	experiencing interstate transactions, having passed the first
	regional interstate banking act in 1982, and a nationwide
	interstate holding company law in 1990.
	Four years later, Congress passed Riegle-Neal, providing
	for nationwide banking. Massachusetts adjusted its law
	accordingly in 1996. Accordingly, the rules for nationwide
	holding company acquisitions have essentially been well-settled
	since 1990.
	The Massachusetts state bank holding company act requires
	bank holding company transactions to be approved by the
	Commonwealth's Board of Bank Incorporation. I chair this three-
	member board, which also includes the Commissioner of Revenue
	and the State Treasurer.
	The law applies to all acquisitions of Massachusetts
	holding companies as well as banks, regardless of whether the
	bank is state or nationally chartered. This provides a
	significant benefit of local review of certain transactions
	that would otherwise only require federal approval.
	Massachusetts statutory approval requires the Board to
	determine that competition is not adversely affected and
	whether or not public convenience and advantage will be
	promoted. This includes a determination of net new benefits,
	such as initial capital investments, job-creation plans,
	consumer and business services, and commitments to maintain and
	open branch offices.
	Other factors considered by the Board include the CRA
	rating of each bank or its subsidiary. In addition, as has been
	referenced several times today, the law requires the bank
	holding company pledge .9 percent of the assets located in the
	Commonwealth to be made available for low-cost loans through
	the Massachusetts Housing Partnership Fund.
	Not unlike the rest of the country, Massachusetts has seen
	substantial consolidation within the banking market during the
	past 20 years. Nevertheless, the number of jobs tied to the
	Massachusetts banking industry has increased during this
	period.
	Consolidation has allowed banks to grow stronger, thereby
	allowing banks to be more competitive, add branch offices, and
	add additional lines of business. This, in turn, has allowed
	banks to increase their employment bases over time despite
	cases of initial layoffs following mergers.
	As a result of nearly 20 years of consolidation, however, a
	bifurcated system has emerged, both locally and nationally,
	which generally includes a small number of very large banks
	operating on a nationwide basis, and a large number of small
	community banks. The existence of very large banks has been
	authorized by federal and state law as legislators and
	regulators recognize that there could be benefits if, like
	other financial service entities, the banking system operated
	on a nationwide basis.
	I appreciate and recognize the Committee's decision to take
	time and understand the impact of these laws, regulatory
	approvals, and consummated mergers on all interested parties. I
	also encourage the Committee to consider what needs to be done
	at the federal and state level to foster a banking system that
	remains receptive to both large nationwide and smaller
	community banks.
	Certainly, a significant benefit exists in maintaining the
	current level of banking choice. Allow me to briefly share with
	you some of my thoughts on how to best position our community
	banks to be able to effectively compete against larger
	nationwide banks to ensure that consumers continue to enjoy the
	advantage of multiple banking options.
	First, regulators and state legislators need to ensure a
	competitive environment exists for our state-chartered banks.
	This can be accomplished by ensuring that the state banking
	code is regularly updated and does not place state-chartered
	banks at a competitive disadvantage.
	In addition, state banking departments need to increase
	efficiency and ensure that they complete their supervisory
	duties while minimizing examination-related regulatory burden.
	Second, regulators, state legislators and Congress need to
	recognize the overwhelming and growing compliance burden on the
	banking industry and its disproportionate effect on smaller
	institutions. For community banks, the costs to comply with the
	litany of federal and state laws and regulations threaten not
	only their ability to compete with their larger counterparts
	and serve customer and community needs, but also threaten their
	own viability.
	Third, thought should be given to requiring that community
	banks receive preference in the process to purchase or lease
	branches closed or divested as a result of a bank merger. This
	will allow community banks to expand their branch networks,
	maximize banking choice, and perhaps provide continuing
	employment opportunities to existing branch personnel.
	And finally, Congress needs to continue to be vigilant
	relative to the efforts of federal bank regulatory agencies to
	preempt state consumer protection law. We should question what
	public policy goals such actions further. If federal preemption
	efforts continue, not only will consumer protection efforts be
	weakened, but federally chartered banks will gain an even
	greater advantage over smaller state banks, resulting most
	likely in the end of the community banking system as well as
	the nation's century-old dual banking system.
	Thank you very much.
	Chairman Bachus. Thank you.
	[The prepared statement of Hon. Steven L. Antonakes can be
	found on page 82 in the appendix.]
	Chairman Bachus. At this time, I'm going to yield to the
	Ranking Member. I'm also going to surrender the chair to him,
	which is permitted by our rules. You don't often see it, but
	you will today.
	Mr. Frank. Again, I thank you. The Chairman of the hearing
	came from Alabama yesterday, and is going back today, and I
	very much appreciate his making this possible. If the majority
	had not cooperated, we couldn't have had this hearing. Thank
	you.
	Chairman Bachus. And it is something that affects all of
	us; and from a business standpoint, we do--efficiency of scale
	is just something that businesses do, so it's something you
	almost expect them to do, to make these combinations when they
	create efficiencies.
	It is hard on the communities, and it's hard on us, to see
	our local institutions in many cases be absorbed by
	institutions which are not locally owned. And it is something
	that is an issue; it's a growing issue across the country as we
	have more bigger banks. We have three that have almost 10
	percent of the deposits now. And while we are creating many
	smaller banks as a result--and that's what often happens, is
	people want a local bank.
	But it's something that we'll be dealing with for years
	ahead. We appreciate your input and your continued input, and
	look forward to working in a bipartisan way to see that the
	consumers and the communities benefit from whatever the path
	that banking and financial services goes now.
	Mr. Frank. Thank you.
	I thank the Chairman as he leaves, and you can be sure that
	the hearing is not going to go on too much longer because I
	have to return this to Tom DeLay by 5:00.
	[Laughter.]
	Mr. Frank. [Presiding.] I want to begin with a couple of
	points of strong agreement with Commissioner Antonakes.
	The last point he raised is really the subject for another
	set of ears. There is a pending action actually already taken
	by the Comptroller of the Currency preempting a wide range of
	state laws.
	The problem is that the Comptroller of the Currency is not
	equipped to do a lot of the consumer enforcement. Indeed, we've
	got a very interesting issue of that sort that I'll be
	addressing later; but our Attorney General, Tom Reilly, is now
	engaged in trying to enforce good consumer protection against
	gift cards.
	People go into stores and get gift cards, and what we've
	found is, people sometimes buy the gift cards, and they've got
	an expiration date that people aren't clear about, and there
	are other restrictions on them; and Attorney General Reilly
	wanted to enforce our Massachusetts consumer laws. The retail
	stores that have these cards are saying, oh, no, you can't do
	that, because we're banks. We're in effect the agents of banks
	here and the Comptroller of the Currency has preempted this.
	Now, the Comptroller of the Currency, if that preemption
	were to go forward, has no way to make those consumer
	protections; and the Controller has stayed out of it for now,
	but this is an example of the kind of overreach that the
	Commissioner is talking about.
	Frankly, I don't think it's an accident that it's at the
	state level that consumer protection is really best done.
	At the federal level, with all due respect to the
	regulators, they're concerned with large systemic issues.
	Individual consumer cases aren't going to have as much impact
	there as they will have on the state and local levels, so
	that's a very important point.
	The second point where I very much agreed with the
	Commissioner--I want to look at this--has to do with giving
	some preference when there has to be the sale of branches to
	community banks.
	We had an example here. When Fleet and BankBoston merged,
	there was of course considerable overlap in branches. I forget
	how many branches had to be divested, but it was a very large
	number.
	The Attorneys General at that time of both the U.S. And the
	State of Massachusetts said, well, antitrust being what it is,
	we want to take all of those branches that have to be divested
	and put them in one big package and sell them to one big
	outside bank, so that outside bank can come in and provide
	competition to Fleet.
	And what many of us in our delegation heard was, no, don't
	do that; we don't want to have to choose between two very big
	banks. This came from our local Chambers of Commerce, local
	retailers, from people who were in the locally oriented
	businesses; they said, we would find that very difficult. And
	in fact, all of us in the Massachusetts Congressional
	delegation signed a letter urging that some of the branches be
	sold to the community banks.
	We got some criticism from some journalists who said we
	were shilling for Fleet in doing that. And it did not come from
	banks, but from borrowers.
	I think about 10 percent of the branches were then sold to
	community banks. We wish it had been more.
	A year later, I was struck that the Boston Globe, which had
	been somewhat critical of Congress, wrote an article saying,
	well, that consumer satisfaction was at a much higher level in
	the smaller banks, in the smaller areas. So that notion of
	preference to community banks is very important.
	Of course, the two come together, because one of the things
	we have is, the Comptroller of the Currency sent out a CD in
	which he tells you that if you change your charter, if you
	leave your state charter and become a national bank, he won't
	regulate you very much. It was kind of a recruitment to come be
	a national bank to the Comptroller of the Currency.
	So I just want to express complete agreement with the
	Commissioner on those points.
	As far as regulation is concerned, I think it is possible
	to kind of help CRA be not a burden, but I do not favor the
	cutbacks in CRA reach which we have heard about.
	Now, to Senator Nuciforo, I just want to focus
	particularly, because he recalled us to one of the purposes of
	this hearing, and that is the job impact.
	As I read the law, the regulators, if they choose to do it,
	have at least some leverage over the community reinvestment
	piece; but they have no leverage over the job piece.
	And I guess we say to them, yes, well, obviously we expect
	there to be some job loss. If in fact it turned out that the
	purchase of a particular in-state bank by some out-of-state
	bank was going to totally reduce employment in a very
	substantial way, that that's something we're going to be able
	to take into account and object to.
	Mr. Nuciforo. I think it is something that we ought to be
	able to consider.
	I think we also have to take a look, not just at what has
	happened in the recent past, but at what is likely to happen in
	the future. Toronto Dominion recently announced its intentions
	to acquire Bank North group; and Toronto Dominion is, of
	course, based in Toronto, and has indicated on several
	occasions in the newspaper that it not only wants to have a
	very significant franchise here in the Northeast, which is
	currently Bank North, but they intend to acquire three or four
	or five other banking properties along the East Coast and
	central part of the country: Ohio, New Jersey, Pennsylvania,
	these kinds of places.
	So we have an opportunity now to amend the law and make
	sure that, going forward, when you have other large mergers
	that are happening, we can consider employment during that
	time.
	Mr. Frank. I'd like to be very explicit.
	People will say efficiency is the thing. Efficiency is very
	important; it ought to be a major goal. But I think it is a
	grave error to make efficiency the only criterion.
	We are consumers in this country; we are also producers.
	And a society in which the ability of people to earn is totally
	neglected, again, it's got an economic problem.
	As I said, Henry Ford paid the workers at the time five
	dollars a day, and people said, what, are you nuts? In fact, in
	some areas, he was; he was this crazy conspiratorial anti-
	Semite, so he was nuts about some things, but he was a genius
	about industrial production.
	Eventually he said, look, if I don't pay these guys a
	decent amount of money, who's going to buy the cars? And I
	think we are in danger in this country of reaching the level of
	income inequality which will produce macroeconomic problems,
	because you will have a consuming public unable to buy enough
	to sustain production. I think that's what we're seeing with
	this great disparity now, where the luxury retailers are doing
	wonderfully and the lower-end and middle- end retailers are
	doing very poorly.
	So I do think it is a mistake to say increased efficiency
	will be the only guideline of public policy, and that we won't
	take into account both regional and even macroeconomic impacts.
	I have over gone my time. I do want to express my
	appreciation to my legislative colleagues. I think we will be
	working together, and I did want to say particularly to John
	Quinn, we've been wrestling at the federal level with the
	question of how to fund the Housing Trust Fund. Some people
	want to take it out of the FHA, and I think that has serious
	problems.
	I must say the analogy to the affordable housing program
	here in our Massachusetts statute here, it's a very good idea;
	so I am going to pursue that further, and we'll be in touch on
	that. Thank you.
	Mr. Watt?
	Mr. Watt. Very briefly, Mr. Chairman. I've been looking
	forward to calling you ``Mr. Chairman'' for a good while, so I
	can't resist calling you ``Mr. Chairman'' while I have that
	opportunity.
	Mr. Quinn, there were a couple of suggestions that you made
	for federal legislation. Any of those things currently in the
	state legislative, state laws?
	Mr. Quinn. Yes. As the Chairman just said, in 1990 we
	passed the state statute that requires nine-tenths of 1 percent
	of the assets within the Commonwealth that are being taken over
	to be made available for call by the Mass. Housing Partnership.
	So it's funded over $900 million of housing programs, and I
	know that the Bank of America, on top of the $18 million grant,
	I think it's $406 million that they'll be making available over
	the next ten years.
	Mr. Watt. Does the state have any employment criteria such
	as what was being suggested by Mr. Nuciforo?
	Mr. Quinn. No, there is not. As part of this bill that we
	file for next session, we would require, premerger--and it's
	critical that it be premerger--to have job projections of one,
	three, and five years out by the petitioner, so that the board
	that's making the call of whether to approve it or not has in
	front of them the facts or the projections of what's going to
	happen over the next five years. So there's no requirement of a
	particular rating of employment, but at least a knowledge of
	what it may be so that a full disclosure is made premerger.
	Mr. Watt. Do you contemplate having some sanction if the
	projections are not lived up to? Or do you suggest disapproval
	of the merger that might result?
	Ms. Flynn. One of my suggestions, it might be scary to the
	industry, but why can't you have a conditional approval ora
	subject-to approval? If you're going to make these commitments
	up front, the approval is subject to, you're committing or
	keeping your word on what was said at the hearing.
	Mr. Watt. What's your position on that, Mr. Nuciforo?
	Mr. Nuciforo. I think we do this with respect to CRA. We
	give people scores. We figure out a way to determine what their
	commitment should be to CRA, and then each and every year there
	is a measurement. So we're able to say, Mr. Antonakes said a
	moment ago, that an institution is outstanding or an
	institution is not outstanding. There's got to be a way to
	similarly measure a bank's compliance with the promises it
	makes with respect to employment.
	And keep in mind, I don't think this should be the sole
	factor; but there are seven or eight factors set forth in the
	bank holding company statute. Why not add another one that has
	to do with employment, particularly when we're seeing numbers,
	employment impacts like the kinds we're seeing right now.
	Mr. Watt. I think I'll yield back, Mr. Chairman.
	Mr. Frank. Thank you.
	Mr. Capuano?
	Mr. Capuano. Mr. Chairman, I just want to thank the
	representative of the Senate and the Commission for coming
	today. I feel as thought we're on the same page, fighting the
	same battles with the same people, and I want to thank you. I
	wish Representative Bachus were still here, because I would
	remind him, as far as I'm concerned, you both speak with
	accents. I struggled to follow each and every word you said.
	[Laughter.]
	Mr. Capuano. I really don't have any questions, because I
	agree with everything you said. I really have just a commentary
	to remind you of the struggles we face.
	I know that you know the numbers in Congress, and I know
	you know that the current Administration is less than friendly
	to even the concept of regulation. Regulation is a swear word
	within the current Administration, and they look the other way
	on all kinds of things.
	That's why, though a CRA rating of outstanding is okay,
	it's fine by me, it's better than not outstanding, it's not
	unusual; it's good, it's as good as you can get. But it's
	really not a stratified rating all that much. I actually think
	it should be rated in a more stratified way so we can really
	know who is doing more than that was necessary.
	As far as I'm concerned, in the banking world, I've been
	doing banking law since, I don't know, 1978 with Kevin Kiley
	pretty much the whole time. I was around during the beginning
	battles of the whole debate about interstate banking that has
	now come to show that mergers aren't necessarily bad or evil in
	themselves if it works out; it actually makes room in many ways
	for smaller banks.
	And this merger is no different. It may or may not; in the
	final analysis, it will probably be an okay thing. It's not a
	bad thing, having mega-banks around for the people who need
	mega-banks.
	The question is, what does it mean in the long run, and
	what can we do to solve it? I know from the legislative
	perspective, I have no doubt that you feel like you have a
	tiger by the tail. What real clout do you have?
	I won't speak for the rest of my colleagues, but I don't
	feel like I have a tiger by the tail as much as we don't have a
	tiger. We have an Administration that doesn't want to regulate,
	doesn't want to look at it; and we have a Congress right now
	that's really not all that interested even in looking at some
	of the things that you suggested.
	Mr. Frank, obviously, is the leader of this group, and
	where he leads, we'll probably follow; and that's all well and
	good. But it's important that you know, because we know, that
	the likelihood of success in the short term is really not that
	great.
	No matter how little it might seem, I think there's very
	little hope that we'll be able to get anything passed through
	Congress that will even approach some of the things
	Massachusetts has done or the things you've outlined.
	I do think we should work on them, and I'm sure we will;
	but I think, like with many things, the leadership really has
	to come from the Commonwealth. You've done a great job thus
	far, you've done what you can do within the limits of the mega-
	merger world, and I encourage you to do more, and as we go
	forward, my hope is that little by little, first of all, the
	people who are doing the mergers don't see us as the enemy.
	Sometimes they will, and that's inevitable. But I don't think
	I've heard anything here today that has been extraordinary. All
	we're asking for is plans. As you said, Representative, what
	are the plans? What are you going to do? How can we deal with
	it? How do we move on?
	We all know that yesterday's ways of doing business, not
	just in the banking world, but everywhere. Manufacturing, we've
	been through manufacturing. Even the fishing industry is
	changing daily. And our job is to try to figure out, okay, how
	do we help the people that are left behind? How do we then
	catch them up?
	Again, I just want to thank you for coming today. Thank you
	for your leadership on these issues and others, and to pledge
	to you our support of your efforts and our cooperation as we
	move forward.
	Mr. Frank. Just a brief comment on what my colleague said.
	It's true with regard to any major legislative changes in the
	direction we'd like to see, they're highly unlikely.
	There is one possible exception. That is, as Commission
	Antonakes noted as the Bank Commissioner, on a bipartisan
	basis, every state bank commissioner and every state Attorney
	General has expressed serious concern about the reach of the
	preemption by OCC, and I think there may be a chance for us to
	work together on that.
	The only thing I would say is this: It is true that we are
	unlikely to be able to get passed some of the legislation we
	want to get passed. On the other hand, our friends in the
	banking industry have some legislation in some cases that they
	would like to see passed.
	And the important principle to remember legislatively is
	that the ankle bone is connected to the shoulder bone, so there
	may be some basis for negotiation there.
	Ms. Lee?
	Ms. Lee. Thank you very much, Mr. Chairman. I too want to
	thank our panelists, coming from the state legislature to
	Congress. I understand, first of all, the power of state
	legislators at this point, and so I appreciate all of your
	progressive moves here in the State of Massachusetts, and want
	to comment on Commissioner Antonakes' comment with regard to
	caution as it relates to federal preemption.
	You know, oftentimes many of us find ourselves on the other
	side of the states' rights argument when it comes to federal
	preemption of laws relating to the government and the financial
	services industry.
	Case in point: I just want to ask your thoughts on this.
	When we passed, of course, the Fair Credit Reporting Act, many
	of you know that California has much stronger consumer
	protection requirements than many states, and of course we had
	a battle around that.
	Some of the discussion, and I have an amendment--well,
	several amendments, but one was to make the federal standard no
	less than the strongest state standard. Of course, that got
	shot down.
	Another one was to allow California and other states which
	had stronger consumer protection requirements, allow those
	states to be grandfathered in. Well, that got shot down. But
	I'm pleased that our Chairman was able to help us mitigate
	against some of the negative preemptive aspects of that as the
	bill went through the House.
	And then the other option could be that the standard, the
	federal standard, should be the floor rather than the ceiling.
	But now we're faced with, again, looking at predatory
	lending, which will be coming up. We've had many discussions
	about this, and I'd like to get your take with regard to what
	the options are for us at the federal level to ensure that,
	again, states' rights provisions prevail where the consumer is
	better protected.
	Mr. Antonakes. Thank you very much.
	First, I should acknowledge really the leadership role that
	Chairman Frank has taken on matters regarding federal
	preemption.
	I think it's a delicate issue in many respects, in that you
	want to recognize that we do have a dual banking system. You
	don't want to unnaturally impinge on the ability of national
	banks to compete nationally and globally, and do their business
	without undue interference from the crazy quilt of state laws
	that exists.
	But I think specifically in areas relative to consumer
	protection, that state laws should be recognized; and if a
	decision is made to roll back state laws, the appropriate place
	for that to come from is Congress and not from a federal agency
	without public debate.
	Mr. Nuciforo. If I could say something about that, it was,
	I think, 1999 or 2000 when the issue of ATM surcharging came
	up, and I know this was debated widely across the country. And
	here in Massachusetts, several of us, including me, filed bills
	that would limit the ability of banks to surcharge.
	That kind of bill was stalled in the state legislature for
	a variety of reasons, one of which was that there was a case
	proceeding in the federal courts in Connecticut that was
	addressing the same issue. The case there was whether the OCC
	and its rules could preempt any state consumer protections in
	that area, ATM surcharging. The federal opinion went against
	us, as I recall.
	So we have seen from the federal side preemptions of a
	whole host and a whole variety of consumer protections that are
	enacted in state law. Predatory lending, I suspect, will be the
	next one.
	But I do think that to the extent you've got any ability as
	a Committee or as a Congress sitting as a whole to specifically
	limit the ability of the federal regulators, OTS, OCC, the
	others, to preempt us, it would make a difference.
	Ms. Lee. How would you suggest that the grandfathering in
	states would have stronger consumer protections? I mean, what
	would be your specific suggestion?
	Mr. Nuciforo. Well, I think states generally get the kinds
	of consumer protections that they deserve and that they want.
	What's good for consumers in Massachusetts might not be the
	kinds of protections that they would choose in Alabama or in
	California or elsewhere.
	So I do think that there should be some effort to seek the
	level of consumer protection required by people on the state
	level.
	Now, how you do that, how you craft that kind of provision
	in Congress, you're the experts on that; I'm not. But that's
	the goal I think we should be moving towards.
	Mr. Quinn. I'll just add quickly, you ought to have the
	federal law be a floor, not a ceiling, and to allow the
	grandfathering of existing laws. Predatory lending is a perfect
	example, for the 25 states that have passed predatory lending
	laws. National banks say, A, we don't do predatory loans; but
	B, your laws aren't going to apply to us anyway. So it puts us
	in a tough situation.
	Then there's always the implicit threat that if it gets too
	tough in Massachusetts, we'll just flip to a federal charter,
	and we'll see you later. So it's a delicate balance, but I
	support the grandfathering and making the federal law no less.
	Ms. Lee. Thank you very much. Thank you, Mr. Chairman.
	Mr. Frank. I just wanted to say to Commissioner Antonakes,
	illustrating part of the principle, which is there are some
	things that are core banking functions, and I don't think--we
	passed a law about check truncation; I wouldn't let the states
	interfere with that. Deposit insurance.
	What we need to do is distinguish. On the other hand, you
	have a claim that there's a preemption if a state tries to
	regulate gift cards which are issued by a retailer, because
	ultimately the retailer is financed by a bank. I think that's
	one of the things we have to determine, is what is or isn't in
	the core banking function.
	Now, some traditions ought to be maintained, so the last
	word will go to a New Yorker.
	Mr. Meeks?
	Mr. Meeks. Thank you, Mr. Chairman. And I really don't have
	many questions. I'll be real brief, also.
	I want to thank all of you for being here and for
	participating in this hearing. I want to thank the Chairman,
	because I think you were right when you urged us to come here,
	that this indeed affects your state in Massachusetts, but it
	has some broader ramifications for all of us, whether you come
	from California, New York or North Carolina. So I want to thank
	you for putting this together and thank everybody that
	participated.
	I mentioned to the Chairman earlier--and I do like that
	word, Chairman Barney Frank is sitting there, so I'll use it as
	often as I can, also--I mentioned to the Chairman a few minutes
	ago that I was tremendously impressed, particularly when we had
	the not-for-profit organizations that were before us and the
	way that they seemed organized as well as the way they seemed
	empowered to negotiate with the banks, et cetera.
	I guess my only question would be, the fact that the way
	that Massachusetts law is written, that all the bank mergers
	have to go through the Massachusetts bank board, do you think
	that has an effect to empower community organizations so that
	they are able to negotiate and try to work together to follow
	through to make sure that the communities' needs and
	requirements are being taken care of?
	Mr. Antonakes. Congressman, I think it certainly does. I
	think the aspect of local review is very important; the fact
	that we have a public hearing here in Massachusetts, often try
	to have it in the community that's most impacted by a merger.
	We had, as was referenced, and Representative Quinn had
	requested, we had our hearing on the Sovereign-Seacoast
	application in New Bedford. We had the Fleet/Shawmut hearing
	back several years ago in Worcester, where that was the city
	that was most impacted by the merger as well. And I think local
	review and the approval process does to some degree empower
	local community groups and further fosters a good dialogue
	between banks and those organizations.
	Mr. Nuciforo. I would agree with everything the
	Commissioner just said.
	We have here in Massachusetts something called the Board of
	Bank Incorporators, and the Board of Bank Incorporators is the
	Commissioner of Banks and the Commissioner of DOR and the State
	Treasurer. Those three sit as a board to decide, upon
	application from merging banks, whether there are net new
	benefits resulting from this merger. Part of that is actually
	the jobs issue, but there are many other factors.
	My good friend John Quinn here has filed a bill, and I
	think it's a terrific bill, that would beef up the net new
	benefits criteria so that we could take a look at specifically
	employment and the impacts on the local economic condition as a
	result of these things.
	Mr. Meeks. Thank you.
	Mr. Frank. Thank you.
	The representative from California.
	Ms. Lee. Thank you.
	Before I leave, I just would like to thank the Chairman for
	bringing us all together today for this hearing, and I wanted
	to say that what I have heard here today really gives me a lot
	of hope in terms of the B of A/Fleet Boston merger. I wish,
	when B of A departed the Bay Area, that we would have had these
	types of constructive discussions ahead of the curve.
	I think that the negative impact in terms of employment, in
	terms of economic impacts and in terms of all of the issues
	that we are still dealing with in the Bay Area as a result, we
	may have been able to--we would have been in better shape. So I
	want to commend you, Chairman Frank, and commend all of you for
	being here today.
	Mr. Frank. Thank you, and I hope the Massachusetts groups,
	while obviously they're not fully satisfied, will reflect on
	that, which is that yes, this process has been helpful; and I
	think we have come out of this, or are going to be coming out
	of it, better than we might have.
	I just, in closing, again want to thank--the gentleman from
	North Carolina?
	Mr. Watt. Mr. Chairman, I ask unanimous consent that I be
	allowed to submit for the record a series of newspaper
	articles.
	I do this because, on the way here, I was going through,
	and there was an identification of so many different local
	impacts that mergers are having, not only in connection to
	community jobs, but the kinds of contributions that are being
	made to non-profits, to charitable institutions. Sometimes the
	larger the merged institution and the further away it is, it
	changes the quality of the charitable contributions.
	Some of those things are reflected in these newspaper
	articles, which I also would encourage the banking interests to
	take a look at. It's a whole myriad of things that are kind of
	set into motion as a result of a merger.
	Mr. Frank. Without objection, they'll be put in the record.
	I just want to close by thanking people. First of all, the
	witnesses really set a good example here. I wish we had
	witnesses--let me just say, these kind of field hearings are
	sometimes, frankly, road shows, dog-and-pony shows, where we
	look good.
	This has been one of the more substantive hearings that I
	have been in as a Member of the Committee, and I want to thank
	my colleagues. I hope everyone in the area appreciates that
	getting nine Members of Congress a couple weeks before
	Christmas isn't easy. Five of our colleagues are from out of
	town. Four of them are from Massachusetts. The witnesses were
	all very good in their testimony. They were on point. They
	responded to questions.
	Finally, when we have hearings in Washington, it's pretty
	routine; but to bring nine Members of Congress and all these
	witnesses and everything else 400 miles away is a lot harder
	than it may look.
	So to both the Republican and Democratic staffs, my deepest
	appreciation. This has been a very well-run hearing, and we've
	had good substance. We haven't lost a Member yet. We have a
	couple more to get to the airport, but I think we'll be okay;
	but I really am appreciative of the staff.
	As I said, it's hard to kind of export this, and I think
	this has been done very smoothly from the recordation to the
	presentation of the witnesses.
	So I just want to thank everybody, and also note that if I
	hear no objection, the record will remain open for 30 days; and
	I should tell the witnesses, what that means is that Members of
	the Committee will have the option, including some who weren't
	here, of submitting questions to us, which we will transmit.
	If any Member of the Committee has a question that they
	would like put to a witness, we will submit that, and the
	witness will have a chance to answer. And we will keep the
	record open, which means, one, if the Members think about
	something, they can do it; and, two, if any witness feels he or
	she wasn't asked something he or she wanted to be asked and has
	a point they want to make, it's not hard to find a Member to
	ask you.
	[Laughter.]
	Mr. Frank. And the responses will be placed in the record.
	Hearing no objection to that, it is so ordered; and the
	hearing is adjourned.
	[Whereupon, at 2:12 p.m., the committee was adjourned.]

	A P P E N D I X



	December 14, 2004

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