Fed urged to block JP Morgan/Bank One merger

by Victoria Thieberger

NEW YORK, April 15 (Reuters) – Community groups on Thursday urged the Federal Reserve to reject the proposed merger between J.P. Morgan Chase & Co and Bank One Corp, saying the mega-merger would limit competition and local communities may be disadvantaged.

The merged company, which would have $1.1 trillion in assets, risked becoming remote from local communities and would not eliminate the risks of predatory lending, they said.

“It is very easy for community-based organizations such as ours to get lost in bank mega-structures, especially if they become geographically more remote,” said Joseph Muriana of the University Neighborhood Housing Program based in the Bronx.

The $58 billion deal, one of the largest financial mergers in U.S. history, will extend the geographic reach of J.P. Morgan beyond its current four states on the East Coast with an additional 13 states in the Midwest and Southwest.

Matthew Lee, the executive director of Fair Finance Watch based in the south Bronx area of New York, said the merger will create another “too-big-to-fail mega-bank” that will limit competition and raise fees.

He raised concerns that the banks did not discourage predatory lending.

“In the South Bronx of New York City, Chase has closed more than a dozen bank branches. Now we find, and we have demonstrated in written submissions to the Fed, that JP Morgan Chase finances check-cashing operations in the same neighborhoods where it closes bank branches,” Lee said.

Check-cashing operations and payday lenders charge exorbitant fees and interest charges and often operate in poor neighborhoods with few traditional banking branches.


J.P. Morgan chief executive William Harrison defended the merger, telling the hearing at the New York Fed that community officers at both firms have already reached out to community groups.

“Based on responses from the community groups, we are creating new initiatives and redoubling our efforts on existing ones,” Harrison said.

J.P. Morgan Chase and Bank One told the hearing they plan to lend and invest $800 billion over 10 years in mortgages and small business lending in under-served markets. This includes $675 billion in mortgages for minority and and lower-income borrowers.

Heidi Miller, chief financial officer at Bank One, told the hearing the combined company, which has about 2,300 branches in 17 states, plans to add more than 100 branches a year for the next three years including in low-income neighborhoods.

Some of the speakers favored the merger.

“J.P. Morgan Chase and its sister banks have been actively involved in our programs involving restoration (of old buildings to provide affordable housing) since their inception,” said Colvin Grannum, of the Bedford Stuyvesant Restoration Corp.

The Federal Reserve, one of several regulators that will need to approve the deal, is required to consider various aspects of the merger including the impact on competition and the needs of communities served by the banks.

The merger is expected to close in mid-2004, subject to regulatory and shareholder approval.

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