Congressman Barney Frank has expressed his serious concerns about the potential impact of the acquisition of Compass Bank by Sovereign Bank on Southeastern Massachusetts, particularly the Greater New Bedford area. After speaking with Mayor Kalisz on Tuesday, January 27, Congressman Frank spoke by phone with Sovereign Bank's New England Division Chairman and CEO John Hamill, to underline the concerns that the Mayor had voiced and to add his own interest in making sure that New Bedford's legitimate economic interests help protect it.
Congressman Frank will be consulting with a wide variety of economic and official representatives in Southeastern Massachusetts about what in particular we should be expecting of Sovereign Bank if this purchase goes forward. Attached is a letter which Congressman Frank sent to John Hamill reinforcing these concerns.
January 27, 2004
Mr. John Hamill
Sovereign Bank New England Division Chairman and CEO
75 State Street
Boston, Massachusetts 02108
I am writing to you to reinforce what I said in our conversation this morning about my serious concerns about the impact that your purchase of Compass Bank could have on the economic situation in Southeastern Massachusetts, especially Greater New Bedford.
This will be in my mind a test of whether or not further bank consolidation can go forward without having negative affects on communities which are working hard to overcome past economic difficulties.
New Bedford is very much in this category. Included in the efforts that have been made by the city over the years to provide economic activity to replace those industries which have been devastated by national trade policies, and other factors, is the deal that the city made with Compass Bank. This was a major commitment by the city for what people assumed would be the mutual benefit of the bank and the people of New Bedford. The possibility that this bargain may not be fully kept is very disturbing to me, both because of the specific impact it would have on the people of the area, and because of what it might suggest about the reliability of private sector partners entering into deals of this sort with government entities.
There is also of course the question of federal law which mandates under the Community Reinvestment Act that financial institutions be cognizant of the effect they have in the communities in which they are located. With the recent increase in bank consolidation, we now face as a nation a very serious question as to whether or not we can continue to maintain the principle of bank attention to local communities as control of these banks becomes geographically more remote from the communities involved.
I have spoke about this with Mayor Kalisz. I share his deep commitment to doing everything possible to make sure that this acquisition has no negative affects on the area he and I both represent. I will be consulting further with Mayor Kalisz, and other Southeastern Massachusetts elected officials, business people, community representatives, unions and others concerned with the economic well being of the region. It is my intention to be back in communication with you shortly with some of the specific concerns that I now have, and that I will probably be developing as a result of these consultations.
In my capacity as the Senior Democrat on the House Financial Services Committee, I have worked with banks to help develop the legislative and regulatory framework in which they can perform the essential role they play in our capitalist system. Along with this, I have insisted that the financial role banks perform can be carried out in a manner that is entirely consistent with the social and economic responsibility they have to various local communities. As I noted when I testified at the Federal Reserve hearing in Boston about the pending acquisition of FleetBoston by Bank of America, banks in our country derive a number of very important benefits from federal legislation, the most important of which, but not the only one, is deposit insurance.
In return for federal legislation which creates this framework, banks have a very important obligation under the Community Reinvestment Act and other statutes to discharge their responsibilities to local communities. I believe that the acquisition of Compass by Sovereign will be an important test of whether or not financial institutions in this country will continue to recognize these obligations as they grow.