Fed OKs merger to create
third-largest U.S. bankA Hawaii group plans to appeal
the decision and seeks to make the
banks fulfill past lending obligations
to Native Hawaiians
WASHINGTON >> Bank of America and FleetBoston Financial Corp. won approval from the Federal Reserve yesterday for a merger creating the third-largest U.S. bank, a behemoth holding nearly $1 trillion in assets and stretching from California through the South and up to New England.
The Fed's board of governors voted 6-0 to clear the merger, determining that Bank of America's acquisition of FleetBoston would not threaten competition or unduly concentrate banking resources. The new institution, with about 5,700 branches, would have assets trailing only Citigroup and another planned bank megamerger between Chicago-based Bank One and Wall Street powerhouse J.P. Morgan Chase.
The proposed purchase of FleetBoston -- a deal estimated at $47 billion when announced last October -- has been met with much anxiety in Boston, which would lose its last major hometown bank, and to a lesser extent in other communities across the country worried about diminished competition and local control.
The central bank's approval removed the last major regulatory hurdle for the combination, which already had been blessed by the Justice Department and the Federal Trade Commission. The merger also must be approved by shareholders of both banks, allowing it to be completed early next month. Both banks have scheduled special shareholders meetings for March 17 for the votes.
At public hearings held by the Fed in January in Boston and San Francisco, witnesses expressed concerns about predatory lending, possible closing of rural bank branches and the trend toward big banks getting bigger.
Last month a federal judge in Honolulu -- saying he lacked jurisdiction -- dismissed a lawsuit against the central bank brought by Native Hawaiians seeking to halt the merger. The Fed noted that Bank of America had recently affirmed its intention to complete its goal for mortgage lending to Native Hawaiians.
Ian Chan Hodges, a spokesman for the Hawaii Fair Lending Coalition, said yesterday that his group plans to appeal the Fed's decision in the 9th U.S. Circuit Court of Appeals, which has jurisdiction over Hawaii. He said the group would press to make sure the banks fulfill past obligations to Native Hawaiians.
The banks maintain that the merger will benefit consumers by giving them an expanded choice of ATMs, branches and banking products.
In its merger review, the Federal Reserve also determined that the new bank -- to be called Bank of America Corp. -- would fulfill obligations under the Community Reinvestment Act, which requires banks to make loans in low-income and minority areas as a condition for opening new branches.
To address concerns, Charlotte, N.C.-based Bank of America has said it would commit to investing $750 billion in community lending and investment over the next 10 years, including $100 billion in the mid-Atlantic and New England markets served by FleetBoston. FleetBoston says it has made $18 billion in community investments over the past four years-- ahead of its commitments -- though some community activists have questioned that.
The merged bank would have assets estimated at $966 billion.
Bank of America has said some job losses may be expected because of the "elimination of redundant administrative positions" but that employees who deal directly with customers will be largely unaffected.
Bank of America has 100-year-old roots in California, where it financed Hollywood movies and the Golden Gate Bridge. It was bought by NationsBank, which adopted its name and moved it to North Carolina in 1998.
FleetBoston is the product of a series of mergers, having operated under names including First National Bank of Boston, Baystate Corp., Bank of Boston and, following a 1999 merger with Fleet Bank of Rhode Island, FleetBoston Financial.