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For or with more information, contact us.
Click here for ICP's frequnetly updated Report on the proposed Bank of America - Fleet. See also, e.g., "Community groups line up re B of A," by Edward Mason, Boston Business Journal, November 10, 2003; "Don't Bank on It: Megamerger Faces Challenges and Critics," by Pradnya Joshi, Newsday (N.Y.), October 30, 2003, Pg. A43; "Bank of America to Buy FleetBoston in $47 Billion Deal," by Sarah Jane Tribble, Rick Rothacker and Amber Veverka, Charlotte Observer, October 28, 2003; "Banks' Megadeal," by Olaf de Senerpont Domis, The Deal, October 28, 2003; "What B of A Could Not Resist: Pays Top Dollar To Become Truly National," by Liz Moyer and David Boraks, American Banker, October 28, 2003, Pg. 1; "Customers, Lenders Worry about Services: Both Institutions' Records Spotty in Some Areas," by Jay Fitzgerald, Boston Herald, October 28, 2003; "Consumer Group Will Challenge Fleet Merger," Associated Press, October 27, 2003.
In late 2000, Inner City Press / Community on the Move closely analyzed Fleet's lending record, in connection with Fleet's acquisition of Summit Bancorp. We're continuing to monitor Fleet, and file periodic updates below. Portions of ICP's Fleet - Summit comments appear at the bottom of this page, preceded by the updates.
And see, e.g., "New York Group Asks Fed to Go Slowly on Fleet-Summit Bancorp Merger," Newark Star-Ledger, December 12, 2000; "N.Y. group Says Fleet Race Bias Should Block Summit Purchase," Providence (R.I.) Journal-Bulletin, December 12, 2000, Pg. 2E; "Fleet Challenged," Trenton (N.J.) Times, December 12, 2000; "N.Y. Group Urges Denial of Fleet Bid for N.J. Bank," Boston Globe, December 12, 2000, Pg. C3; "Critics Charge Bank Discriminates," New Jersey Express-Times, December 12, 2000; "Fleet Acquisition Challenged," Manchester (N.H.) Union Leader, December 12, 2000; "Regulators Asked To Deny Bank Merger," Hazleton (Pa.) Standard Speaker, December 12, 2000; "Fleet Fingered Over Minority Lending Patterns: Bronx Group Tries to Block Bank's Purchase of Summit; Inner City Public Interest Law Center Also Warns of Loss of Access to Banking Services," CBSnewyork.com, December 12, 2000; "Fleet didn't Meet 1999 Community Lending Vows: Consumer Group," by Joseph Giannone, Bridge News, December 11, 2000; "Fleet's Lending Practices Criticized: N.Y. Group Trying to Block Summit Deal," by Eric Convey, Boston Herald, December 12, 2000; "Group Asks Fed To Go Slowly On Fleet-Summit," by Richard Newman, Bergen (N.J.) Record, December 12, 2000; "Regulators Asked To Deny Bank Merger," Associated Press, December 11, 2000.
For or with more information, contact us.
Update of September 23, 2002: ICP's Fleet Watch Report had been on something of a hiatus -- until, on September 18, Fleet called with news of a new mortgage "alliance" with Cendant (a company ICP and others have previously critiqued). ICP left a message asking for Fleet's press release, or, as it arrived, "Overview." It states: "The significance of our alliance with Cendant cannot be overstated. It marks a momentous transformation of our mortgage business model, one that reflects our intensifying focus on customer service." Huh? We'll report more when we get more facts (the "overview" was not helpful in this regard). Also last week, ex-shareholders of the ex-Summit Bank sued Fleet, alleging that "Fleet misrepresented the quality of its Latin America business. The lawsuit, filed on Sept. 19 in the United States District Court for the District of New Jersey in Newark, seeks class action status and unspecified damages from Fleet"...For or with more information, contact us.
Update of August 5, 2002: on August 1, Rep. Michael Capuano, D.-Mass., issued "an early opinion'' opposing a possible acquisition of Fleet by a "large New York bank'' (that'd be Citigroup), stating that he is concerned such a deal would shift decision-making power out of New England. You got that right...
Update of July 15, 2002: the mid-2002 Fleet news is the company's decision to shutter rather than sell its Robertson Stephens investment banking division. The unit was bought in 1998 for $800 million; like Tyco-CIT, it didn't work out... In April, Fleetannounced it would scale back its Principal Investing venture capital arm and discount brokerage Quick & Reilly, in addition to looking for a buyer for Robertson Stephens. Combined, the three units earned $700 million for FleetBoston in 2000, but lost nearly $800 million in 2001. The Boston Globe recently puffed up Fleet as "no longer a take-over target" but we're not so sure...
Update for May 13, 2002: Buenos Aires newspaper La Nacion reported last week that FleetBoston may shift its Argentine business to the Montevideo, Uruguay free trade zone. When the going gets tough, the tough head for the exits, apparently...
Update of April 22, 2002: Fleet on April 16 announced that it plans to sell its investment bank, Robertson Stephens, slash its business in Latin America and scale back its venture capital portfolio. A stock analyst opined that Fleet "is getting rid of the things that Citigroup does not want and it is emphasizing the businesses that Citigroup does want." Other possible Fleet-buyers include HSBC and Wachovia...
Update of December 31, 2001: While Fleet continues to spin about its exposure in Argentina, we thought it'd be a good time to dip into the mail bag, for a more grassroots report:
Subj: bank beat/fleet
Date: 12/21/01 10:34:42 PM Eastern Standard Time
From: [Name withheld]
To: FleetWatch [at] innercitypress.orgI've been following your site for a few months now.. it is very interesting. A couple notes from the Boston area on Fleet to forward on to Bank Beat (I am not an employee, just a customer.) 1) According to a recent Boston Globe article (published Thursday [12/20/01], I think), Fleet is shutting down its 24 hour customer service. It will not staff its call center on Saturday evenings, Sunday, or overnight. I don't see how this could save them any significant amount of money (how much does it cost to pay a few phone reps to work Sunday), but they must be desperate to further siphon off the cash flow from their retail banking business to cover their massive losses in Robbie Stephens, venture capital, and Argentina. 2) They have a new tactic to scare away underprivileged people at their headquarters branch (100 Federal Street) in Boston. Allegedly for "security reasons", they have posted a guard at the entrance to the branch. There is a sign saying "Fleet Banking Customers Only", and only people with a Fleet Bank ATM card are supposedly allowed past the door. (I am not making this up.) I'm sure they have never liked cashing payroll checks and state checks drawn on Fleet for people without Fleet bank accounts (or probably anyone, for that matter.) Identification checks seem like a very effective tactic to scare away many people, especially immigrants, etc. I'm not sure if they would actually turn away a non-Fleet customer, although the security guard asks to see your ATM card before you enter. I wonder if they will export this tactic to additional branches.
Keep those cards and letters coming.
Update of November 26, 2001: Fleet has applied to the Federal Reserve for approval to "establish 'Fleet Overseas Capital, LLC' as an agreement corporation" and for this company to acquire two special purpose trusts "that will own and lease to an Austrian-based leasee hydroelectric power generation facilities located in Innsbruck, Austria."
That is, a dam. The leasee would be Innsbrucker Kommunalbetriebe AG; the lease would be for 25 to 30 years. There's more: Fleet states that it "proposes to establish the Company as an agreement corporation rather than as an Edge corporation in order to maximize state income tax benefits that are associated with 'pass-through' entities such as limited liability companies."
Update of September 24, 2001: In the aftermath of the September 11 plane-bombings of the World Trade Center and the U.S. Pentagon, Inner City / Finance Watch has prepared a report on bank links to Al Qaeda and other state- and non-state terrorist groups. As to Fleet, we note that the Russian Business Monitor of October 27, 1999 ("Funding Sources for Separatists in Chechnya") reported that "[s]ome serious money is coming from the West as well. The jihad in Chechnya and Dagestan is sponsored though a bank with the complicated name of ANFO SOF TA VIR Limited, based in London, with subdivisions in Sheffield, Bedford, and Leicester... [Supporters] in the United States... have set up numerous "public" educational, charity, and religious organizations which accumulate considerable sums. The money is then transferred to private banks, the Fleet Bank being the most noticeable of these. All transactions with foreigners are carried out via the SWIFT electronic system, which facilitates operations with Russian correspondents. Some banks channel the revenues of export contracts in the needed direction, thus effectively evading current American law. Most money sent to Russia for "humanitarian aid" to the Caucasus, for example, is involved in alleged fuel deals with the participation of trader mediators."
We are unaware of any Federal Reserve or Treasury Department inquiry into this report, which came out well before the Federal Reserve approved Fleet's applications to acquire Summit Bank in New Jersey, Connecticut and Pennsylvania (see below). Click here for the full Report. For or with more information, contact us.
Update of June 11, 2001: in upstate New York on June 8, Community Bank System Inc. announced a deal to buy 36 branches with deposits of about $484 million from Fleet... CBSI picks up when the big banks want to leave: previously, CBSI bought branches from Chase... Also last week, Fleet announced it's buying the asset management business of Liberty Financial, for over $1 billion. So far this year, Fleet has sold its mortgage company, branches around New York City, and now 36 branches in upstate New York...
Update of April 9, 2001: The other shoe has dropped: Fleet last week sold most of its mortgage lending business to Washington Mutual. Defensive -- as it should be -- about how this pull-out from a retail market that Shawmut and BankBoston used to serve will effect its compliance with the lending commitments it made, while acquiring BankBoston and Summit, Fleet has sought to emphasize that it's keeping its "retail origination" capability in its "footprint" -- that is, in the states where Fleet has branches. Even prior to the sale, Fleet was behind schedule on its mortgage lending commitment to low- and moderate-income borrowers. This will hardly help.. We'll be (Fleet) watching.... Until next time, for or with more information, contact us.
Update of April 2, 2001: The Boston Globe last week got on the issue of Fleet's shortfalls in complying with its 1999 lending pledge, made while Fleet acquired BankBoston. From the Globe's March 28 editorial: "Fleet executives say they are meeting their annual community reinvestment goals in all key areas save one: mortgage lending for low- and moderate-income homebuyers...". The Globe went on to quote Chad Gifford that "[w]e're not only on the hook... It's something we want to do." Well, complying with the 1999 BankBoston pledge certainly didn't take precedence over acquiring yet another bank (Summit, in early 2001), nor the following other publicly-reported Fleet plan: "FleetBoston Financial Corp. is seeking to amass clients among the rich in Mexico as it faces the prospect of slower profit growth in its Latin American footholds of Argentina and Brazil. The bank plans to more than double its workforce in Mexico, adding 150 employees to open mutual funds that may attract more than $4 billion to its asset management unit by 2006, said James Callahan, BankBoston's president in Mexico" (Bloomberg, 3/30).
If Fleet truly wanted to comply with the lending pledge it made in 1999, it could. It's a matter of priorities...
Update of March 26, 2001: Fleet, while its applications to acquire Summit were pending, played "hide the ball" about the branches it would close. On March 23, Fleet proudly announced that it will be closing 80 branches: 33 from the old Summit, and 47 from Fleet itself. "And they said they didn't know...". Doors start closing on July 12, 2001...
On the ongoing Fleet Watch, Inner City Press recently received a Freedom of Information Act response from the Federal Reserve Board, about complaint against Fleet. Here's three:
Fleet Mortgage Group, Inc.: Consumer disputes bank's foreclosure action. Over course of loan transaction, she encountered many problems, alleging a false inspector report when led to her paying $4,000 for repairs, a Regulation Z violation. False credit reporting has caused her to be denied credit. Mentioned a dispute over a delinquent tax bill. FRB action: Referred to OCC.
Fleet Bank, N.A.: Consumer is the cosigner on his wife's installment loan with bank, which has credit life insurance. Consumer is disputing bank's assertion that there is a limit on disability benefits that are paid out in the event of disability and says that there is no stipulation on the note about payment limits. Further, bank has neglected to make payments over the last 90 days (while his wife was disabled). Bank's action/inaction has adversely affected his credit history. FRB action: Referred to OCC.
Fleet Bank (R.I.), National Association: Consumer states that the bank misrepresented to him both orally and in loan documents by charging him a prepayment penalty. He claims that when he decided to refinance with another institution, that institution informed him that he was assessed a $16,000 prepayment penalty. FRB action: Referred to OCC.
Finally, for now, Business Week reports that John Hancock "may be a takeover target" for FleetBoston Financial Corp.; BW's "Inside Wall Street'' column quotes Andrew Addison of Addison Investment Management for this. And the beat goes on...
Update of March 12, 2001: So, Fleet last week issued a press release, claiming to be on or near schedule in complying with its BankBoston lending pledge. If the numbers are correct, Fleet certainly "speeded-up" performance, since its six- and nine-month reports. But further clouds of trouble are brewing. At a recent investors conference, Fleet president Chad Gifford made comments leading to reports that Fleet is looking to sell its mortgage business. (Rep. Capuano, D-MA, held a copy of one such report aloft, at the NCRC annual conference last week; another Massachusetts Congressman, who will remain nameless, said "I just had Chad Gifford in my office last week -- I wish I'd asked him about it." Asked by the Boston Herald how such a sale would affect Fleet's BankBoston (and, by implication, Summit) pledges, Fleet's James Schepker bobbed and wove, saying: "We are committed to the $ 14.6 billion over five years... We will work hard to do it in the areas delineated, but some elements could change. We may exceed some, we may not meet some others. But overall we will meet the $ 14.6 billion." We'll see....
Update of March 5, 2001: On March 1, 2001, Fleet "consummated" its acquisition of Summit. On February 27, Fleet named the buyer of the five branches in the Atlantic City market it was required to divest: Richmond County Financial Corp.. Fleet threw in two branches on Staten Island, as well. Fleet reconfirmed that it will be eliminating 2,000 jobs, and closing 85 branches; it says it will reveal the locations "this Spring." Media speculation continued into whether Fleet CEO Terry Murray, scheduled to retire at the end of 2001, will do "one more deal" -- the (hype) candidates are First Union, Wells Fargo, even Bank of America (this possibility ignores the current prohibition on any one bank controlling more than 10% of U.S. deposits). More practically, Fleet is said to be focused on expanding in the New York City market. It was unable to "win" European American Bank; the number of other targets is dwindling. Meanwhile, Fleet officials will reportedly be in Brooklyn, New York on March 5, to announce the expansion of "First Community Bank" (which Fleet acquired along with BankBoston) into New York City. Fleet now says its "First Year" report on its performance under its BankBoston lending pledge will be ready later this month. We'll be watching -- this Fleet Watch will continue... Until next time, for or with more information, contact us.
Update of February 20, 2001: Well, on February 12, both the Federal Reserve and the Office of the Comptroller of the Currency approved Fleet's applications to acquire Summit. The Federal Reserve Board's Order, at 25, admitted that "[t]he HMDA data indicate that FleetBoston's originations to African American applicants as a percentage of its total originations was below the percentage for lenders in the aggregate in some areas... [and] indicate that FleetBoston's origination rates for Hispanics were below the origination rates for the aggregate in most states and MSAs examined...". So: Fleet lends less to African Americans and Latinos than other lenders do.
On the issue of whether Fleet is still involved in questionable subprime lending, even after the Fleet Finance fiasco, the Fed's Order, at footnote 24, states that "[o]ne commenter has suggested that FleetBoston might be engaged in subprime lending that has an adverse effect on minority borrowers. FleetBoston has stated that it currently conducts no lending activities that are subject to the Home Ownership and Equity Protection Act (HOEPA), and that controls are in place to ensure that no HOEPA-covered transactions are initiated." This is a strange "rebuttal" by the Fed, implying that "subprime" loans are only those covered by HOEPA (when industry observers estimate that less then 5% of subprime mortgage loans currently fall under HOEPA). Or is the Fed saying that it's only HOEPA loans that might "ha[ve] an adverse effect on minority borrowers"? The Fed's Order have become more and more self-serving, more and more illogical. As to Fleet being behind schedule in five of the six categories of its 1999 BankBoston pledge, the Fed states that "[t]his pledge was not a commitment made to the Board and, therefore, is not enforceable by the Board." But then the Fed recites Fleet's "new" New Jersey pledge, as rebutting concerns about, among other things, the 85 branch closures that "might be closed as a result of the proposal." Footnote 44 and accompanying text. So: the Fed never has to enforce, or even consider, these pledges, when a bank like Fleet fails to comply, a year later. But a new pledge? It can be recited in the Fed's Order, as somehow rebutting the adverse effects on a proposed merger....
The OCC's Order is more wordy, as to the Fleet-BankBoston pledge, stating that "comments received by the OCC expressed concerns with FleetBoston's progress in meet the terms of its 5-year, $14.6 billion Community Investment Commitment that was announced in 1999... The OCC does not enforce such bank community development or CRA-related commitments... however, FleetBoston responded to these concerns by explaining that the results of the first six months of the commitment's terms do not mean that the goals will not be achieved within five years. FleetBoston noted that loan production levels and loan demand can vary during different time periods and are not always constant." Yeah, but the first half (and nine months) of 2000 were, according to the Fed, one of the strongest economies in decades. If Fleet didn't meet its commitments in that environment, serious questions are raised about the coming four years.
Like the Fed, while saying it won't enforce (or even inquire into) Fleet's 1999 pledge, the OCC recites Fleet "new" New Jersey pledge, as some sort of rebuttal of the adverse issues raised. The OCC also recited that it "is aware that a lawsuit was recently filed against Fleet Mortgage Company... by the State of Minnesota Attorney General regarding Fleet Mortgage Company's alleged sharing of mortgage account information with telemarketers. While the filing of this lawsuit is not adequate grounds to delay rendering a decision, the OCC is committed to ensuring that national banks protect the financial privacy of consumers." The OCC then cites a rule that will go into effect on July 1, 2001. So, as with every other issues, it's deferred to later..
Update of February 11, 2001: Fleet's application to acquire Summit is on the Federal Reserve Board's agenda for February 12, 2001. Whatever action is taken will be reported here, in our next weekly update (Feb. 18), or before. Meanwhile, Fleet has responded to the breach of contract suit by former BankBoston CEO Ira Stepanian, who among other things claims that Fleet threw him out of an office he was to receive as part of his golden parachute. Fleet's counter-claim: "Stepanian has disparaged and attempted to embarrass the bank and its management at shareholder meetings, in internal communications in which Stepanian analogized the banks managers to war criminals, in interviews with the press and in articles and letters to the press which Stepanian authored." Fleet loves silence: it has previously moved to get Beantown consumer reporters taken off the bank beat; in this Summit proceeding, it has asked community groups for (ongoing) silence. This FleetWatch will keep on eye on Stepanian's suit -- and on Fleet's suit against Advanta's deal with Chase Manhattan Mortgage, as they proceed...
The mail we'll print this week is a practice request, to which readers with knowledge are free to respond:
Subj: Fleet/Sovereign
Date: 2/9/01 7:12:15 AM Eastern Standard Time
From: jsfaulkner@snet.net
To: FleetWatch [at] innercitypress.org
I need information on the sale or transfer of auto loan contracts by Fleet to Sovereign around Dec. 1997. Where can I get it?
September 19, 1997 Fleet Auto Division purchase $2.0 billion consumer/commercial loans, 225,000 customers throughout NJ, NY and New England
(NOTE: just hit the sender's e-mail address, above, to respond).
Until next time, for or with more information, contact us.
Update of February 5, 2001: While Fleet's Summit applications continue to pend, it has announced that it would layoff about 2,000 workers. Meanwhile, Fleet has SUED the proposed sale of Advanta's subprime mortgage lending business to J.P. Morgan Chase & Company. As reported by Reuters on February 2, FleetBoston has filed a lawsuit against the deal:
According to papers filed late on Thursday in the Delaware Court of Chancery, Fleet said its 1998 agreement to buy the bulk of Advanta's consumer credit card business provided that any remaining obligations tied to that sale would be assumed by any buyer of "substantially all" of Advanta's assets.
Fleet contends that the sale by Advanta's of its $15.8 billion mortgage loan servicing portfolio qualifies as the sale of substantially all of its assets.
"Advanta's mortgage banking business comprises 80 percent of its managed receivables, over 50 percent of its net income, and 34 percent of its assets," court papers say. Selling it "affects the existence and purpose of Advanta."
Chase Manhattan Mortgage Corp., of Edison, New Jersey, said in a Jan. 8 statement that, pending shareholder and regulatory approval, it expected the deal for Advanta's servicing portfolio for 200,000 customers and its $1 billion annual origination capability to close in the first quarter 2001. No sale price was specified.
Fleet, joined in the suit by its credit card units, said it had "specifically bargained for protection...against what Advanta is here attempting: the wholesale transfer of substantially all of its business to a third party without a concomitant assignment of its obligations to Fleet."
The $140 million obligation, effective through 2003, includes the balance of a short term advance from Fleet to Advanta related to the credit card acquisition, and refunds Fleet made for overcharges on $1 billion in new customer balances, the lawsuit said. Fleet blamed the overcharges on errors allegedly made by Advanta in coding what interest rates applied.
Fleet also claims that any acquiror of Advanta must also honor its agreement not to compete with Fleet's credit card business through 2002. The Boston-based bank said it would suffer "severe irreparable harm" if a new owner did not assume Advanta's obligations.
"Given Advanta's precarious financial condition, if Advanta sells its mortgage banking business, its ability to satisfy any judgment that Fleet ultimately obtains will...possibly be eliminated."
Fleet wants the court to enjoin the merger, which is scheduled for a shareholder vote on Feb. 27, and to award unspecified damages.
--Reuters newswire, February 2, 2001, emphasis added.
Chase has argued to the Office of the Comptroller of the Currency (the "OCC") that it is NOT acquiring "substantially all" of Advanta's national bank. Fleet, clearly, disagrees. It remains to be seen if the OCC may reconsider its initial view of the proposed transaction (as not requiring an application from Chase), in light of Fleet's lawsuit and arguments. We will have more on Fleet's lawsuit against Advanta's sale of its subprime business to Chase, and Fleet - Summit, as they develop. For or with more information, contact us.
Update of January 29, 2001: On January 24, the Department of Justice announced that Fleet has agreed to divest (sell-off) five branches in the Atlantic City, NJ market, with $232 in deposits. This would seem to set the stage for the Federal Reserve Board to vote on Fleet's application to acquire Summit (after this week's Federal Open Markets Committee meeting on interest rates, of course -- as of January 27, the Fed had not given the required 48 hour notice of any vote on Fleet-Summit, on its "Sunshine Line"). But the Fleet Community Reinvestment Act and fair lending issues have not been resolved, despite Fleet's "new" commitments in New Jersey and Pennsylvania...
Meanwhile, various journalists have confirmed that ABN Amro is putting European American Bank up for sale -- and have named Fleet as the likely acquirer. The Asbury Park (NJ) Press recently (1/19/01) quoted Fleet CFO Eugene McQuade that "Manhattan is really where we need to get some strength," and quoted Fleet spokesman Jim Schepker that "about 75 of the combined 537 Fleet and Summit branches in New Jersey will close" -- down from the previous "85" branch closing projection, but still troubling... For or with more information, contact us.
Update of January 22, 2001: Last week saw a rumor that Fleet is looking to acquire First Union; both banks quickly denied it. But there's been a development in the ongoing Fleet - Summit proceeding, as relates to Pennsylvania. While Fleet's formal responses to its regulators have been cursory, ICP has obtained a copy of a Fleet document entitled "Community Investment Commitment for Pennsylvania," labeled "Draft / Confidential (Not For Distribution)." In various letters -- not to its regulators -- Fleet has now referred to "a finalized version of material describing Fleet's four-year $750 million Community Investment Commitment ('CIC') to Pennsylvania." The version that ICP has obtained breaks the numbers out this way:
"Total Small Business $164 MM annually. Residential Mortgage Lending to LMI Borrowers $12 MM in 2001 (9 mos); 23MM in 2002; $25MM in 2003; $27 MM in 2004; $87 MM total - 4 years. Home Equity Lending to LMI Borrowers: $1MM annually. Community Development Lending in LMI Areas: $3 MM to $5 MM annually. Consumer Lending to LMI Area: $3 MM annually. LIHTC [tax credits]: $2 MM to $3 MM annually. Equity: $.5 MM annually. Charitable Contributions: $.45 MM annually. Technical Assistance: $TBD."
Strangely, Fleet has not sent a copy of this to formal "protestants" of its applications. Nor did Fleet "cc" its Pennsylvania response to all protestants. Fleet shareholders who have attempted to discuss these issues -- including Fleet's admitted under-performance on its previous, 1999 pledge -- have met with resistance. Fleet's approach to CRA is one of the strangest, of the large banks.
Update of January 16, 2001: While the Fleet - Summit applications remain pending, we have, this week, the next (received) installment from our Fleet Files. First, however, the windfall to Summit Chairman Joseph Semrod and Vice Chairman Jack Collins. Semrod will be paid $ 8.5 million and Collins $ 4.3 million in salary, bonuses and cash severance payments when and if the deal closes, according to a proxy statement filed with the Securities and Exchange Commission. When they retire from Fleet, Semrod's annual pension will be $ 1.5 million and Collins' pension will be $ 750,000, according to the proxy. In addition, Semrod and Collins, as well as their spouses, will be entitled to medical benefits for the rest of their lives.
Now (for comparison's purpose), e-mail of the week:
Subj: Another Fleet Bank horror story!
Date: 1/6/01 7:52:43 PM Eastern Standard Time
From: [ ]
To: FleetWatch [at] innercitypress.org
We were long time customers of BankBoston and were very happy with their services. Then along came Fleet! We had an account that charged a flat fee ($8) for their basic checking account. When Fleet merged with BankBoston they immediately raised our monthly fee to $10 plus tacked on extra fees for using the ATM's, making deposits, writing a certain amount of checks, etc. We decided to close the accounts because we just couldn't afford that anymore! However when we went to close the accounts the branches refused to because there was still a credit line (reserve) with an open balance owed. We were being billed separately for this reserve and did not understand why they couldn't continue to do that but just close the checking accounts. We stopped using the checking accounts and they still charged us for them each month to the tune of approximately $15! Finally my husband talked to a manager on the phone who assured us that we could close the accounts and leave the reserve only opened until paid off. Again when I went to the Bank to try and close the checking accounts they insisted they could not do that. I had the name of the manager we spoke to and I told the "customer service rep." to contact him directly. It was only until then she relented and said "I'll close it but we're not supposed to and I'll have to charge you the 'anticipated' monthly fee ($14)". I had already spent way too much time in the bank arguing with her over closing it so I said "just please close them!" When asked why we were closing it I told her that we couldn't afford all the extra fees they were now charging and she told me we "just had the wrong account for our banking needs"! We didn't have the "wrong account" when it was BankBoston!!! ...It's a very scary thought to think that Fleet Bank is the 8th largest bank in the US and will probably only get bigger!
Massachusetts banking commissioner Thomas Curry has now written to the Federal Reserve Bank of Boston: "This . . . is to raise your attention to the mounting evidence received by the Division that operational problems may exist within Fleet." Curry has told the Boston Herald that he is not opposed to the Summit deal per se (this is not saying much, since Summit has no presence in the Bay State), but that federal regulators need to consider whether Fleet can handle another acquisition at this time. The answer? No.
Update of January 8, 2001: As reported below, Fleet Mortgage on Dec. 28 was sued by the Minnesota Attorney General, for selling the names and home phone numbers of its customers. While Fleet immediately called the lawsuit "inflammatory," the Bergen (N.J.) Record of Jan. 5 reports that " Vaguely described monthly fees ranging from $ 4 to $ 17 would wind up on mortgage bills without customers written consent. Fleet was paid for some of the customer lists and took a percentage of the sales, according to the complaint. 'That practice is no longer being practiced,' said James Mahoney, director of corporate affairs. Still, he said, the company intends to defend itself vigorously against the lawsuit.... Mark Herr, spokesman for New Jersey Attorney General John J. Farmer, said Thursday that... he is watching the Minnesota case." And why wouldn't the state attorney generals in Connecticut and Pennsylvania, where Fleet seeks to acquire Summit's banks, also be watching? And why hasn't the Fed yet asked Fleet about this case -- in the same way that the Fed has asked U.S. Bancorp? Developing...
From the mail bag:
Subj: Fleet punishes customers for good credit
Date: 1/5/01 5:07:56 AM Eastern Standard Time
From: [ ]
To: FleetWatch [at] innercitypress.org
My husband and I have been married for two years, just had our first baby and are saving like crazy for a new house. One of the things we've been doing to ensure that we qualify for the best possible mortgage rate is to close our credit card accounts.
When I called [Bank X] to cancel my card, they graciously offered to lower my interest rate to match other offers I had received. Of course this incentive was proposed to keep my business, but in turn also will save us money and allow us to pay off the balance sooner than expected. However, much to my outrage, Fleet Bank offered just the opposite. They stated that those closing credit card accounts with an outstanding balance would be subject to a percentage rate of 29 percent! Unbelievable, sneaky and just plain dirty-rotten.
Fleet may have earned a few hundred dollars in interest on our credit card balance, but they'll be losing two loyal bank members of over 15 years and all of the money we would have invested and spent over a lifetime as we'll be closing ALL of our accounts with them.
Thank you for your time...
[Note: we have "redacted" the name of the author -- unlikely Fleet, we respect consumers' privacy... We've run the e-letter, as a cautionary tale...]
Update of January 2, 2000: Fleet's applications to acquire Summit remain pending. Fleet has yet to disclose the locations of the 85 branches it would close, or to explain why it is making a lending commitment limited to one of the three states in which Summit has branches. Nor has Fleet explained why this "new" commitment should be given weight, given that it is behind schedule on five of six categories of its previous, 1999 lending "commitment." On Dec. 26, the Boston Herald reported that a trade association of check cashers, the Financial Services Centers of America, has filed comments opposing Fleet's Summit applications, focusing on Fleet's 1999 decision to refuse to maintain accounts for check cashers. Fleet says its decision was triggered by the bank regulators' call for a crackdown on money laundering. But Fleet's own regulatory compliance -- and not just on CRA and fair lending -- is questionable. On Dec. 28, the Minnesota Attorney General sued Fleet Mortgage, for illegally sharing consumers' confidential information with telemarketers. Fleet, as has become its practice (see accounts of Fleet's December 11, 2000, response to ICP's Community Reinvestment Act challenge, below), expressed "surprise" at the Minnesota AG's lawsuit, and called the suit "inflammatory," in a press release. A certain "bunker mentality" seems to prevail, in Fleet's headquarters. Summit has set its shareholders meeting for February 26th...
Update of December 26, 2000: ICP has finally received the "point-by-point response" to its comments, that Fleet's spokesman loudly promised two weeks ago. It's a fair weak document, replied to below (the OCC reply is set forth here, similar filings have been made at the state level, and to the Fed). Happy New Year!
December 26, 2000
Office of the Comptroller of the Currency
Attn: Comptroller Hawke, et al.
250 E Street, SW
Washington, D.C. 20219
Dear Comptroller Hawke, et al.:
On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this is a supplemental comment opposing the Applications to the Office of the Comptroller of the Currency ("OCC") by Fleet National Bank, Providence, Rhode Island (together with its affiliates, "Fleet"), to acquire and merge with Summit Bancorp's three banks, in Connecticut, New Jersey and Pennsylvania (collectively, "Summit"), OCC Control Number 2000-ML-02-0032. Primarily, this submission responds to Fleet's December 21, 2000, Letter. On December 15, 2000, ICP submitted a detailed comment to the OCC, opposing and urging the OCC to request further information from Fleet regarding this proposal.
Fleet's Letter states that it is a response "to the comment letter submitted to the Federal Reserve Board ['FRB'] by Inner City Press ('ICP'). Under separate cover, ICP has submitted virtually the identical comment letter to your office. FleetBoston's Response addresses all of ICP's comments."
To its seven page December 21 letter (replied to below), Fleet has annexed a 21 page agreement it has reached in New Jersey, the commitments in which are explicitly limited to New Jersey. It is unclear why Fleet believes that this 21-page attachment, whatever its merits (see infra), should be dispositive on a proposal that involves acquiring banks in three states, including Connecticut and Pennsylvania (from which, to ICP's knowledge, the FRB has received other comments, beyond ICP's -- the OCC should request these, from the FRB). In fact, ICP would think that this attachment should give rise to a simple question: "if you can do that (including (re-) setting lending and fee commitments, etc.) in New Jersey, why are you not making those commitments in Connecticut and Pennsylvania?" ICP trusts that the OCC will now ask precisely this (obvious) question, and ICP reserves its right to comment on Fleet's response thereto.
Now, a brief reply. The first substantive portion of Fleet's December 21 letter to the FRB (the "Resp.") purports to address Fleet's lending performance in the Philadelphia Metropolitan Statistical Area ("MSA"). Fleet apparently does not dispute that its lending performance in the Philadelphia MSA is disparate -- its response consists of shifting (or limiting) the focus to the New Jersey portion of the MSA, where, Fleet states, it has eight branches (and where, significantly, it admits that the percentage of its originations of conventional home purchase loans that were to African Americans in 1999 was "below the industry average." Resp. at 2. To the degree that Fleet argues that its performance in the New Jersey portion of the Philadelphia MSA is better than ICP, MSA-wide, presented it, Fleet is admitting that its performance in the Pennsylvania portion of this MSA is WORSE than ICP presented it.
Throughout the Resp., Fleet argues that it is somehow not "appropriate" to analyze its conventional home purchase lending record, compared to the aggregate's. ICP disagrees, particularly in light of controversies (including steering) that have emerged concerning FHA and other "government" lending. In any event, ICP's analysis compared Fleet's conventional home purchase lending to the aggregate's conventional home purchase lending -- certainly a fair comparison.
Concerning the Long Island, NY MSA, Fleet does not contest that its denial rate disparity between Latinos and whites for conventional home purchase loans is higher than the aggregate's; even including non-conventional loans, it is still higher. Resp. at 2.
In the Bridgeport MSA, Fleet apparently does not dispute that Fleet Mortgage Corporation's {"FMC's") lending performance in the Bridgeport MSA is disparate -- its response consists of shifting the focus to other, unnamed, Fleet subsidiaries. However, as to the NYC MSA, Fleet contests ICP's analysis of FMC. Resp. at 3.
In the Buffalo, NY MSA, Fleet does not contest that it made only one conventional home purchase loan to an African American applicant in 1999. That Fleet presumptively steers virtually all African American applicants in this MSA to non-conventional (FHA, etc.) loans, separately, raised issues that should be inquired into in this proceeding.
In the Trenton, NJ MSA (which includes portions of Pennsylvania), Fleet acknowledges that its denial rate disparity between African American and whites, for conventional home purchase loans, is higher than the aggregate's. Resp. at 3.
Fleet acknowledges that its "denial rate on refinancing for Hispanics in the Long Island MSA in 1999 is higher than the industry average...". Resp. at 4. It appears that Fleet's response, in Section H of its Resp., again includes Fleet subsidiaries that Fleet's Resp. does not identify.
ICP contends that comparing Fleet's denial rate disparities by race to the aggregate's is both fair, and relevant. Fleet responds with raw "origination rate" statistics, without comparing its origination rate for protected classes to its origination rate for whites. Resp. at 4. In any event, Fleet for example acknowledges a denial rate disparity between African Americans and whites in the St. Louis MSA of 3.56-to-one. The difference between ICP's and Fleet's numbers appear to spring from Fleet including other categories of HMDA-reporting than those that ICP analyzed.
What Fleet's Resp. ignores is that receiving few to no applications from protected classes in much MSAs as Detroit and Birmingham, Alabama (Resp. at 5) itself raises fair lending issues, that should be inquired into in this proceeding.
As ICP has noted, Fleet projects closing 85 branches, thereby further reducing access to credit and financial services. See, e.g., the Philadelphia Inquirer of October 3, 2000: "the merged banks would close about 10 branches in Connecticut and about 75 in New Jersey...". Emphasis added. Beginning more than two month ago, ICP raised this issue, to Fleet and to the FRB. But neither Fleet's Application nor its November 27, 2000, letter to the FRB responding to ICP's Initial Comment provide necessary information about these projected branch closings. Fleet's actual branch closing list should be disclosed (its selective announcement of December 13, regarding New Jersey but not Connecticut, undercuts its claim that release of the actual list would cause it competitive harm).
The remainder of Fleet's December 21 submission makes claims about its "new" pledge, which is explicitly limited to New Jersey, and which, in any event, is of questionable weight, given Fleet's now twice admitted under-performance on its previous pledge.
Fleet's Application to the FRB (which, on information and belief, Fleet also submitted to the OCC), at Exhibit Q, reflected that Fleet is behind scheduling in performing on the lending commitment it made in 1999, while acquire BankBoston. Fleet's December 21 Resp. provides more recent data -- and Fleet is STILL behind schedule in performance. Resp. at 6.
In this light, it is questionable how much weight should or can be given to Fleet's "new" pledge (which, in any event, is limited to New Jersey). As a regulator, the OCC is required to considered Fleet's actual performance to date; and, in deciding what weight to give to Fleet's "new" pledge, the OCC must consider Fleet's performance (here, under-performance) on other recent pledges made.
Again, it is unclear to ICP why Fleet believes that this 21-page attachment, whatever its merits (see infra), should be dispositive on a proposal that involves acquiring banks in three states, including Connecticut and Pennsylvania. In fact, ICP would think that this attachment should give rise to a simple question: "if you can do that (including (re-) setting lending and fee commitments, etc.) in New Jersey, why are you not making those commitments in Connecticut and Pennsylvania?" ICP trusts that the OCC will now ask precisely this (obvious) question, and ICP reserves its right to comment on Fleet's response thereto.
Fleet's Application, at 14, states that "FleetBoston's divestiture commitment is attached as Confidential Exhibit C." This material information must be released. The OCC should hold hearings on Fleet's Application, and, on the current record, should not approve the Application.
If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.
Very Truly Yours,
Matthew Lee, Executive Director
For or with more information, contact us.
Update of December 18, 2000: Fleet, while still not providing the "point by point response" to ICP's comments that its spokesman on December 11 promised, has made a submission to the Federal Reserve Board which confirms that, not only six months into its BankBoston pledge, but nine months in as well, Fleet is behind schedule in five of six categories. This Fleet submission, dated December 12, responds to Federal Reserve Board questions, stating among other things that "FleetBoston has identified the communities in which its branch network overlaps with that of the Summit Banks... See Confidential Exhibit 1 for a list of FNB and Summit Bank branches, grouped by community, which are being considered as candidates for consolidation." ICP comments to the Fed include a request that the propriety of this withholding be reviewed. Fleet's letter shows it be to behind in complying with its 1999 BankBoston pledge, and that Fleet's "affordable mortgage" loans have declined, including in New York and New Jersey, from 1998 to 2000. Fleet's letter concludes that "FleetBoston is in the process of negotiating a CRA agreement with community organizations in the communities affected by the merger... Upon completion of the negotiations and execution of any agreements, a copy of said agreement or agreements will be provided."
Relatedly, on December 13 in Trenton, New Jersey, Fleet and community organizations (whose work ICP respects) announced a new Fleet pledge in the state of New Jersey. The pledge is partially made up of Fleet's pre-existing $14.6 billion pledge, made during Fleet's 1999 acquisition of BankBoston -- a pledge under which Fleet is behind schedule in compliance, by its own admission. ICP, asked for comment, congratulated the New Jersey community-based negotiators of this new Fleet pledge, but noted that Fleet is behind schedule in complying with the "five year" pledge it made in 1999. Fleet did not amend or back away from its branch closing projection (85 branches to close, 75 of them in New Jersey), although it announced some far-from-specific policies for branch closings. These are all issues that remain to be addressed, in the pending proceedings before the Federal Reserve Board.
Also, on December 15, ICP submitted comments to the Office of the Comptroller of the Currency, on Fleet National Bank of Rhode Island's applications to acquire each of Summit's three banks. The Pennsylvania Banking Department has confirmed receipt of ICP's comments; the Connecticut Banking Department has committed to forward to ICP portions of Fleet's Connecticut application, on which ICP will be commenting. ICP continues to await the "point-by-point response" that Fleet's spokesman on December 11 told reporters would be forthcoming "in a matter of days." Fleet's response, whether "point by point" or, as was the case with Fleet's first response in this proceeding, evasive -- will be reported in this space. For or with more information, contact us.
Update of December 12, 2000: ICP's filings are in, to the Federal Reserve Board in Washington, the Federal Reserve Bank of Boston, and state banking departments in Connecticut and Pennsylvania. A copy has also been faxed to Fleet's headquarters, in Boston. The Associated Press covered the challenge, and quoted Summit spokeswoman Patricia Lynch, that "no decisions have been made about which branches will be closed... A spokesman for FleetBoston did not return phone calls seeking comment."
This Fleet spokesman did, however, make a statement to the Boston Herald (Dec. 12): "While declining to respond to the group's complaints one by one, a Fleet spokesman said the big Boston-based bank would stick with its commitment to serve the groups cited by Inner City. 'Between Fleet and Summit, we have extensive involvement in community development activities in the state of New Jersey and we anticipate continuing to be strongly committed to community development and affordable lending in New Jersey,' Fleet spokesman James Mahoney said" (among other things). This response, with its unique focus on one of the three states in which Summit has branches, was strange. Fleet's strategy was partial elucidated in the Bergen (N.J.) Record of December 12, "Group Asks Fed To Go Slowly On Fleet-Summit" -- in which Fleet's spokesman also states: "We will be responding point-by-point [ICP's challenge] as per Federal Reserve protocol within a matter of days." Yeah, we'll be waiting for that, and will report it in this space. Meanwhile Fleet, which is behind schedule in performing on its 1999 BankBoston pledge, is wildly trying to "cut deals" (that's how one participant described it to ICP). After the Fed's (initial) comment period closed, Fleet stuck a deal (yet to be publicly disclosed, but alluded to in the article cited above; it will be analyzed in our next update) in one state; in another state -- "it begins with a 'P'" -- Fleet was alluding to a statewide plan, and possible "side-letters" (this terminology's being used by Fleet). But if Fleet hasn't complied with its previous commitments, of what value are such "side letters"? And if Fleet's CEO Terry Murray said publicly (clearly, directed at stock analysts) that Fleet would cut costs by closing 85 branches -- 75 in New Jersey, and ten in Connecticut -- how can Fleet, two months later, claim it doesn't know where these branch closings would be? We will have more on these questions, and Fleet's now-foreshadowed responses, in our next update...
* * *
[Below: ICP's Dec. 11, 2000, filing:]
PETITION TO DENY AND HEARING REQUEST BY INNER CITY PRESS / COMMUNITY ON THE MOVE & THE INNER CITY PUBLIC INTEREST LAW CENTER IN OPPOSITION TO THE APPLICATIONS OF FLEETBOSTON FINANCIAL CORP. TO ACQUIRE SUMMIT BANCORP & ITS AFFILIATES
DECEMBER 11, 2000
I. PRELIMINARY STATEMENT
On behalf of Inner City Press/Community on the Move and its members and affiliates, including the Inner City Public Interest Law Center (collectively, "ICP"), this is a timely comment opposing the Applications of FleetBoston Financial Corporation and its affiliates ("Fleet") to acquire Summit Bancorp and its affiliates ("Summit").
Fleet, despite its still-disparate lending record (see Sections II and III, infra), despite not being on track to comply with the lending commitment it made when it acquire BankBoston in 1999, here seeks to expand again, including into a new state: Pennsylvania. Fleet's failure to comply with its previous commitment is made clear by Exhibit Q to the Application, the "Memorandum on Community Lending and Investment Programs." See Section IV, infra.
Fleet projects closing 85 branches, thereby further reducing access to credit and financial services. See, e.g., the Philadelphia Inquirer of October 3, 2000: "the merged banks would close about 10 branches in Connecticut and about 75 in New Jersey, mostly in the northern part of the state, and may sell a few in the Atlantic City area, where the combined company would otherwise control half of all bank deposits, according to Terrence Murray, Fleet's chairman." Beginning more than a month ago, ICP raised this issue, to Fleet and to the Federal Reserve Board ("FRB"). See ICP's timely initial comment and Freedom of Information Act ("FOIA") request, dated November 13, 2000 (the "Initial Comment"). But neither Fleet's Application nor its November 27, 2000, letter (the "Resp.") responding to ICP's Initial Comment provide necessary information about these projected branch closings. Fleet already charges higher fees than other banks (see Section V); this proposed merger would have anticompetitive effects, which Fleet's divestiture proposal, the specifics of which is being improperly withheld, would not mitigate. See Section VI. Fleet's Application, at 14, states that "FleetBoston's divestiture commitment is attached as Confidential Exhibit C." This timely requested and material information must be released. See Section VII. For all of these reasons, the Federal Reserve Board should hold hearings on Fleet's Application, and, on the current record, should not approve the Application.
II. Fleet's Still-Disparate Lending Record
We will begin this analysis by considering Fleet's record in the Philadelphia Metropolitan Statistical Area ("MSA"), which spans Pennsylvania (which Fleet seeks to enter, with this proposal), and New Jersey (where Fleet already has a banking presence, and a CRA duty). In this MSA, where both Fleet Bank, N.A. (NJ) and Fleet Mortgage Company report Home Mortgage Disclosure Act ("HMDA") data, in 1999 the combined entities made 123 conventional home purchase loans to whites, and only three to Africans Americans (a ratio of 41-to-one), compared to the aggregate industry's ratio of 11.87 to one. Fleet denied the applications of African Americans four times more frequently than those of whites, a denial rate disparity higher than the aggregate industry's in this MSA. [snip - contact ICP for more recent data]
IV. Fleet's Failure to Comply with its 1999 Lending Pledge
In 1999, Fleet applied to the Federal Reserve Board to acquire BankBoston. ICP, based on Fleet's then already-disparate lending record, opposed Fleet's applications, submitting analyses of Fleet's 1997 and 1998 lending record. In the midst of the applications proceeding, Fleet announced a 5-year lending commitment, of "Small Business Lending: $7.5 billion; Affordable Housing: $4.0 billion; Community Development Lending / Investment: $2.0 billion; Consumer Lending: $1.0 billion; Equity Investments: $100 million; Technical Assistance and Support: $15 million." The FRB, in approving Fleet's application to acquire BankBoston, recited this commitment, as somehow rebutting ICP's and others' comments.
Now, in late 2000, Fleet's Application to acquire Summit, at Exhibit Q, the "Memorandum on Community Lending and Investment Programs," discloses, among other things, that "in the first six months of [Fleet's 5-year] $14.6 Billion Commitment, Fleet has provided loan and investment dollars across its entire footprint at the following levels: Small Business Lending: $696.4 million; Affordable Housing: $271.2 million; Community Development Lending / Investment: $83.4 million; Consumer Lending: $109.7 million; Equity Investments: $7.8 million."
Multiplying each "six month" figure by ten reflects that Fleet is behind "schedule" for everything except "Consumer Lending." Again, the FRB recited (and, ICP's contends, relied on) Fleet's pledge in approving Fleet's applications and notices to acquire Bank Boston.
ICP raised this issue -- Fleet's failure to comply with its 1999 lending commitment -- in its Initial Comment of November 13, 2000. Fleet's November 27, 2000, purported response states, on this matter, that "we respectfully submit that the methodology used by [ICP] to analyze the status of the commitment does not render a complete picture... it fails to consider the unevenness of the business cycle... This analysis ignores the fact that some months, seasons and years are stronger for loan production than others. Ultimately, the proof of the program will be the results at the end of the five years."
Well, ICP respectfully submits that Fleet's performance to date under its 1999 lending commitment is weaker than any other bank's performance under its commitment(s). Fleet's peers have, with few to no exemptions, reported "obliterating" their pledges. While ICP contends that in many cases, these banks' lending pledges were of limited CRA relevance, as they include all business loans up to $1 million (Bank of America), and such products as credit cards (Citigroup), the FRB must compare Fleet's self-reported performance, and post hoc justifications, to those of Fleet's peers. Note that most observers, including the FRB's Chairman, call this one of the strongest economies in memory. If Fleet cannot comply with its lending pledge in this environment, serious questions are raised, including about Fleet's managerial resources. Fleet announced its 1999 lending pledge during the pendency of its application to acquire BankBoston, and the FRB recited the pledge in its approval order, as somehow rebutting the objections (including ICP's) to Fleet's acquisition of BankBoston. Fleet cannot be allowed to, for example, including Summit's performance in its reporting on its 1999, pre-Summit pledge. Nor can Fleet be allowed to have a five year "safe harbor," as its November 27, 2000, letter requests. Note that the FRB has recently asked Firstar for reporting under its lending pledges, and has not deferred until the expiration of the pledge periods its demands for such reports. Specifically, the FRB's November 22, 2000, letter to Firstar asks:
"Provide the number and total dollar amount of loans that Firstar has made under the 1998 Star Bank, N.A. Lending Initiative, the 1999 St. Louis Loan Initiative, and the 2000 North St. Louis Loan initiative in each of 1998, 1999 and 2000, as applicable to: LMI individuals; to individuals residing in LMI census tracts; to small businesses; to small farms; and to small businesses located in LMI census tracts... for each category by state, and by multi-state MSA....
Fleet's attempted defense -- that it is too early to assess performance, in December 2000, of a Lending Commitment made in mid-1999 -- is without merit, and is inconsistent with the FRB's precedents (see supra). The FRB has asked for reporting, by state and multi-state MSA, of a pledge made this very year, 2000. Firstar has provided this information, and made it publicly available. See Firstar's submission of December 5, 2000, at Exhibit 15.
The FRB must be consistent, from application to application, from bank to bank. Fleet should be directed to respond to questions similar to those the FRB has recently asked Firstar, including a break-out of Fleet's performance under its 1999 lending commitment in each state, MSA and county. On the current record, this Application could not legitimately be approved.
ICP has been told that Fleet anticipates announcing some "new" (or perhaps only reheated) commitment(s) on December 13, 2000. These must be looked at, particularly in Pennsylvania, the new state Fleet is seeking to enter, in light of Fleet's failure to comply with its previous, 1999 lending commitment(s)...
In Pennsylvania, note that in the Scranton / Wilkes-Barre / Hazleton MSA, Summit Bank in 1999 made only three conventional home purchase loans to low income borrowers, only seven to moderate income borrowers, and ten to borrowers with incomes 100% to 119% of MSA median. The aggregate industry's figures were 410, 989 and 640, respectively. Summit has been underserving LMI borrowers in this MSA; its record in this MSA was overlooked in its most recent CRA examination, and portends to be overlooked by Fleet.
Also note that, while Fleet is underperforming on the lending pledge it made in 1999, while acquiring BankBoston, it is boosting its lending elsewhere: Bloomberg of December 5, 2000, reports that Fleet's "Brazilian unit said it plans to boost lending to Brazilian companies by 40 percent next year... Geraldo Carbone, president for FleetBoston's Brazilian unit told reporters during a lunch in Sao Paulo the bank plans to increase corporate lending to $5.6 billion next year from $4 billion today. He also said the bank plans to boost mortgage lending by 30 percent next year to $1.3 billion... 'Our goal is to increase our customer base between 300,000 and 350,000 people with the current number of branches,' Carbone said. He also said the bank has 165,000 customers in Brazil, with most of them high income clients...".
Fleet is expanding its overseas lending, and explicitly targeting "high income clients," while its lending to low and moderate income neighborhoods in its CRA assessment area declines. [FN 1: While Fleet disproportionately excludes and denies LMI and minority borrowers, it's also worth noting that Fleet's subsidiary Fleet Capital Corp. is a major lender to the private prison concern Avalon Correctional Services Inc., according to Avalon's credit agreement amended December 9, 1999]. ICP is requesting hearings, and that this Application be denied.
V. This Proposal Would Harm the Convenience and Needs of Communities: Branch Closings and Fees
a) Fleet Would Close 85 Branches; It Must Disclose
Since acquiring BankBoston, Fleet has closed numerous branches. See, e.g., The Providence Journal-Bulletin, April 11, 2000, Pg. 4E, "FleetBoston closing branches in Mass. and N.H."
Fleet's business model, including for this proposal, is cost savings through branch closings. The Philadelphia Inquirer of October 3, 2000 reported that "the merged banks would close about 10 branches in Connecticut and about 75 in New Jersey, mostly in the northern part of the state, and may sell a few in the Atlantic City area, where the combined company would otherwise control half of all bank deposits, according to Terrence Murray, Fleet's chairman."
More than a month ago, ICP raised this to Fleet, encouraging it to address the branch closing issue forthrightly in its Application. This was not done. ICP raised the issue in its Initial Comment of November 13, 2000. Fleet's November 27, 2000, response is evasive, stating, on this issue, that "[w]ith regard to the concerns expressed about the branch closings, Fleet has stated in its application that it has not developed any definitive plans to consolidate, relocate or close any branches of Fleet National Bank or any of the Summit Banks.... Based on its preliminary analysis, Fleet believes that approximately 85 branches may be closed, a fact that has been reported in the media."
Fleet's projection of 85 branch closings cannot have been an arbitrary number, taken "out of a hat," so to speak. Clearly, Fleet has considered its and Summit's branch networks, and has applied thereto some as-yet-undisclosed branch closing criteria, in order to come up with the estimate that Fleet presented to stock analysts and the media. Fleet's response is evasive and insufficient; it is an attempt to impermissibly preclude analysis and consideration of the foreseeable effects of this proposal, during the FRB's consideration of the Application. The FRB must demand more detailed information on Fleet's plans, including the criteria used (see supra) and the addresses of the branches projected to be closed; this information must be made available to the public (including to ICP, which timely requested it, a month ago); and, the comment period must be extended. On the current record, this Application could not legitimately be approved.
b) Fleet's Fees Harms Consumers and Communities
ICP refers to the Board to (and hereby incorporates into the record by reference) the following Boston Glove editorial about Fleet's new "anti-LMI" fee policy [attached]:
The merger of Fleet Financial Group and BankBoston yielded a muscular financial hybrid, but one with a tin ear for community relations. Little else explains FleetBoston's decision to raise fees on the basic accounts that serve its lower-income clients. The bump in transaction fees for about 54,000 customers creates the impression, perhaps unfair, that FleetBoston does not want to retain modest clients as part of the retail deposit base that its executives say they need. To avoid the fees, the bank requires a $2,000 checking account balance, a $2,500 balance in an interest-bearing account, or a $4,000 combined balance. That's a high bar for many hard-working families in Massachusetts. Bank officials say that help is just a call away for customers to determine if another type of account is more economical. But anyone who has tried to make sense of the bank's confusing staff-assist" charge or quickly reach a service representative by phone will remain skeptical...
Also note that a reporter from the Boston Herald has been suspended, after his coverage of Fleet's fee policy resulted in Fleet complaining to that newspaper, in which it is a major advertiser [attached]:
A Boston Herald consumer columnist, suspended without pay after complaining the newspaper censored his stories critical of FleetBoston Financial, is fighting to be reinstated... [The reporter] wrote a front-page story April 3 saying the merger will result in higher fees for 700,000 former BankBoston customers.He has said that, after two other stories on the issue, two of his managers told him to stop writing about Fleet, a major advertiser and credit source for the Herald. FleetBoston spokesman Jim Mahoney has said the bank contacted the paper twice to complain about Washington's reporting tactics, but without mentioning advertising.
Fleet's arrogant and anti-consumer policies bode badly for the consumers and communities served by Summit Bank.
VI. This Proposed Merger Is Anticompetitive
Fleet's Application, at 14, acknowledges that this proposed combination would be anticompetitive, in the Atlantic City market. ICP contends that the relevant geographic market is smaller than the banking market defined by the FRB of Philadelphia (the "FRBP") (see App. at n.12), and that Fleet's divestiture proposal, the specifics of which are being improperly withheld, is insufficient. Fleet would still control over 30% of deposits in this market, even as overly-broadly defined by the FRBP -- the Boston Globe of November 28, 2000, at D10, puts the figure at 31 percent. Fleet's Application, at 6, states that "FleetBoston's divestiture commitment is attached as Confidential Exhibit C." This exhibit must be released to the public, and to ICP, which timely requested it. The comment period must be extended, and ICP allowed to comment on this material improperly withheld Exhibit.
VII. The FRB Must Respond to ICP's November 13, 2000, FOIA Request; the Comment Period Must Be Extended
On November 13, 2000, ICP submitted to the Board and to the FRBB a request, including under FOIA, for complete copies of Fleet's application, and for related records including those reflecting communications between FRS personnel and representatives of either Fleet or Summit. ICP's November 13 letter stated that "ICP is sending this request to both the Federal Reserve Bank of Boston and to the Board, so that the Reserve Bank can send all documents in its possession as quickly as possible, while the Board acts on the balance of the FOIA request. The Board's H2A, as of November 9, 2000, lists these applications as having been received, with a comment period running to December 11, 2000. We ask for the responsive records (including from the Board) as soon as possible, to allow FOIA appeal (if necessary) and analysis, during the current comment period." Emphasis added.
As of December 10, 2000, ICP has NOT received any FOIA response from the Board, despite the passage of 27 days. In light of ICP's timely and explicit request, quoted above, the comment period must be extended, while the documents requested 27 days ago, including the Disclosure Schedule to the Merger Agreement, App. at n.5, are provided to ICP, and ICP is allowed to analyze and comment on them.
VIII. Conclusion
As demonstrated above, Fleet's lending record is still disparate; Fleet has not complied with its 1999 lending commitment; Fleet's projected branch closures, and fees, would harm the convenience and needs of communities; and, the proposed merger would be anticompetitive. For all of these reasons, the FRB should schedule and hold hearings on the proposal, and, on the current record, could not legitimately approve the Applications.
If you have any questions, please immediately telephone the undersigned, at (718) 716-3540.
Respectfully submitted,
Matthew Lee, Esq.
NOTE: This page will be updated, when we receive the information that
Fleet is seeking to withhold, in the face of Freedom of Information requests from ICP, and
Fleet's responses to the regulatory agencies. For or with more information, contact us.
Click here for Archive #1: March 1999-Nov. 2000 (Fleet-BankBoston, etc.)
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