Testimony of Jesse Van Tol, CEO, National Community Reinvestment Coalition, April 25, 2019, in Charlotte, North Carolina, at a hearing on the proposed BB&T/SunTrust bank merger with the Federal Reserve Board and Federal Deposit Insurance Corporation.
Thank you for the opportunity to testify here today. My name is Jesse Van Tol, and I am the CEO of the National Community Reinvestment Coalition (NCRC) and its 600 community-based members that champion fairness in banking, housing and business.
This hearing is an important hearing. Your job is an important job.
I will detail our position on this merger at the end of the testimony, but let me start by saying that in general we believe that mergers of this size require a demonstration of a significant public benefit before they go through. We believe that such benefits need to be detailed, in writing, and then (and only then) the merger can go through.
The law requires you to examine significant concentration and growth through the lens of how the public benefits. We believe that regulators have historically failed in their duty to do so.
The problem with the way the bank regulators approach antitrust analysis is that it is a tipping point analysis. There is a threshold, a point at which a bank is considered “anti-competitive.” The challenge with so called “trust busting” is that practically speaking, once a bank reaches a certain size many people consider it impractical, disruptive and perhaps politically unfeasible to break them up.
We believe this type of analysis should be considered along the way, as banks grow, with a larger obligation the bigger they get. In the case of very large financial institutions and the public benefit they create, we believe that 1+1 needs to equal more than 2. In too many cases, communities have experienced that 1+1 equals less than two.
Traditional antitrust analysis has other limits, including that it has been too focused on price, and not focused on other factors, such as whether a bank’s increased size allows them to be well managed, maximizes benefits for customers and creates a broader public benefit.
Let me read from your former colleague, Federal Reserve Board Governor Daniel Tarrullo. He said:
“The regulatory structure [for SIFIs] should discourage systemically consequential growth or mergers unless the benefits to society are clearly significant. There is little evidence that the size, complexity and reach of some of today’s SIFIs are necessary in order to realize achievable economies of scale and scope.”
That said, the standard for merger review is a balancing standard. Does the benefit created outweigh any potentially negative impacts of growth and concentration? NCRC has suggested that merger approvals need to include forward looking statements detailing how the public — communities — will benefit. We have developed one such form for doing so, known as a Community Benefits Agreement.
I am pleased to say that we have had productive conversations with BB&T & SunTrust about a Community Benefits Agreement. Together, we have convened meetings in six cities with nearly 200 community-based organizations. We have discussed community needs, and ways in which the combined institution could better serve them.
We expect to reach a Community Benefits Agreement with the bank in the near future, detailing lending, investments and services for low- and moderate-income people and communities of color.
When the bank articulates such a forward looking commitment, detailing how the public benefits, we would be in the position of saying that the merger could go through on a community reinvestment basis. It is your job, additionally, as the regulators, to ensure that the banks forward looking statement creates a clearly significant public benefit.
Thank you again for the opportunity to testify, and I am happy to answer any questions you may have.