[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



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                 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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