[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]
THE NEXT MEGABANK? EXAMINING THE
PROPOSED MERGER OF SUNTRUST AND BB&T
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON FINANCIAL SERVICES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTEENTH CONGRESS
FIRST SESSION
__________
JULY 24, 2019
__________
Printed for the use of the Committee on Financial Services
Serial No. 116-41
[GRAPHIC IS NOT AVAILABLE IN TIFF FORMAT]
__________
U.S. GOVERNMENT PUBLISHING OFFICE
40-159 PDF WASHINGTON : 2020
--------------------------------------------------------------------------------------
HOUSE COMMITTEE ON FINANCIAL SERVICES
MAXINE WATERS, California, Chairwoman
CAROLYN B. MALONEY, New York PATRICK McHENRY, North Carolina,
NYDIA M. VELAZQUEZ, New York Ranking Member
BRAD SHERMAN, California PETER T. KING, New York
GREGORY W. MEEKS, New York FRANK D. LUCAS, Oklahoma
WM. LACY CLAY, Missouri BILL POSEY, Florida
DAVID SCOTT, Georgia BLAINE LUETKEMEYER, Missouri
AL GREEN, Texas BILL HUIZENGA, Michigan
EMANUEL CLEAVER, Missouri SEAN P. DUFFY, Wisconsin
ED PERLMUTTER, Colorado STEVE STIVERS, Ohio
JIM A. HIMES, Connecticut ANN WAGNER, Missouri
BILL FOSTER, Illinois ANDY BARR, Kentucky
JOYCE BEATTY, Ohio SCOTT TIPTON, Colorado
DENNY HECK, Washington ROGER WILLIAMS, Texas
JUAN VARGAS, California FRENCH HILL, Arkansas
JOSH GOTTHEIMER, New Jersey TOM EMMER, Minnesota
VICENTE GONZALEZ, Texas LEE M. ZELDIN, New York
AL LAWSON, Florida BARRY LOUDERMILK, Georgia
MICHAEL SAN NICOLAS, Guam ALEXANDER X. MOONEY, West Virginia
RASHIDA TLAIB, Michigan WARREN DAVIDSON, Ohio
KATIE PORTER, California TED BUDD, North Carolina
CINDY AXNE, Iowa DAVID KUSTOFF, Tennessee
SEAN CASTEN, Illinois TREY HOLLINGSWORTH, Indiana
AYANNA PRESSLEY, Massachusetts ANTHONY GONZALEZ, Ohio
BEN McADAMS, Utah JOHN ROSE, Tennessee
ALEXANDRIA OCASIO-CORTEZ, New York BRYAN STEIL, Wisconsin
JENNIFER WEXTON, Virginia LANCE GOODEN, Texas
STEPHEN F. LYNCH, Massachusetts DENVER RIGGLEMAN, Virginia
TULSI GABBARD, Hawaii
ALMA ADAMS, North Carolina
MADELEINE DEAN, Pennsylvania
JESUS ``CHUY'' GARCIA, Illinois
SYLVIA GARCIA, Texas
DEAN PHILLIPS, Minnesota
Charla Ouertatani, Staff Director
C O N T E N T S
----------
Page
Hearing held on:
July 24, 2019................................................ 1
Appendix:
July 24, 2019................................................ 55
WITNESSES
Wednesday, July 24, 2019
King, Kelly S., Chairman and Chief Executive Officer, BB&T
Corporation.................................................... 5
Rogers, William H., Jr., Chairman and Chief Executive Officer,
SunTrust Banks, Inc............................................ 6
APPENDIX
Prepared statements:
King, Kelly S.,.............................................. 56
Rogers, William H., Jr....................................... 63
Additional Material Submitted for the Record
King, Kelly S.:
Written responses to questions for the record submitted by
Representatives Ocasio-Cortez, Sherman, and Garcia of
Illinois................................................... 69
Rogers, William H., Jr.:
Written responses to questions for the record submitted by
Representatives Ocasio-Cortez, Sherman, and Garcia of
Illinois................................................... 73
THE NEXT MEGABANK? EXAMINING
THE PROPOSED MERGER OF
SUNTRUST AND BB&T
----------
Wednesday, July 24, 2019
U.S. House of Representatives,
Committee on Financial Services,
Washington, D.C.
The committee met, pursuant to notice, at 10:10 a.m., in
room 2128, Rayburn House Office Building, Hon. Maxine Waters
[chairwoman of the committee] presiding.
Members present: Representatives Waters, Maloney,
Velazquez, Meeks, Clay, Scott, Green, Cleaver, Foster, Beatty,
Vargas, Gottheimer, Lawson, Tlaib, Porter, Axne, Casten,
Pressley, Ocasio-Cortez, Lynch, Gabbard, Adams, Garcia of
Illinois, Phillips; McHenry, Wagner, Posey, Luetkemeyer,
Huizenga, Duffy, Stivers, Barr, Tipton, Williams, Hill, Emmer,
Zeldin, Loudermilk, Davidson, Budd, Kustoff, Gonzalez of Ohio,
Rose, Steil, Gooden, and Riggleman.
Chairwoman Waters. The Committee on Financial Services will
come to order. Without objection, the Chair is authorized to
declare a recess of the committee at any time.
Today's hearing is entitled, ``The Next Megabank? Examining
the Proposed Merger of SunTrust and BB&T.'' I now recognize
myself for 4 minutes to give an opening statement.
Good morning. Today we are here for a hearing on the
proposed merger between SunTrust and BB&T. Our witnesses today
are BB&T's Chairman and CEO, Kelly King, and SunTrust's
Chairman and CEO, William Rogers.
I am concerned that if this merger goes forward, it will
create yet another megabank that is too big to manage and that
poses a risk to our financial system. This is the largest
proposed merger since the financial crisis, and it would create
the 6th largest bank in the nation.
If this merger is approved by regulators, the resulting
bank would have around $442 billion in assets, making it larger
than Washington Mutual was and more than twice as large as
Countrywide was. Of course, the failure of those two
institutions played a significant role in the financial crisis.
As the Trump Administration has rolled back rules for our
biggest banks, I and other Democrats warned that we would see
larger banks start to merge again, and sure enough, here we
are. Bank mergers of this scale are a serious matter with
implications for the broader economy that warrant scrutiny by
Congress.
I am concerned that this proposed merger would ultimately
not be beneficial for the consumers or the communities that
these two banks currently serve. It remains unclear how many of
the 57,000 people who work at these two banks would lose their
jobs as a result of this merger, which the banks say will save
them $1.6 billion annually.
It is also unclear how many bank branches may be closed,
given that the 2 banks have 740 branches that are within 2
miles of another branch, according to news reports.
Additionally, this committee needs to better understand
what the new bank's commitment to diversity will be, especially
as reflected in its management, board of directors, and
retention of employees.
For these reasons, and because regulators typically rubber
stamp these merger applications with little scrutiny, I asked
the Federal Reserve and the Federal Deposit Insurance
Corporation to at least defer any final decisions on the
application for this merger until after this committee has had
the opportunity to conduct a full review of the matter.
As a result, in part, of scrutiny and skepticism from
Members of Congress, SunTrust and BB&T have taken the step of
announcing a Community Benefits Agreement with community groups
in advance of this hearing. The commitments that the bank made
in the agreement seem to be a positive step, though it is
nonbinding, and it is unclear if it represents a meaningful
increase in lending and investments beyond what the banks are
already doing.
Ultimately, it is not enough to address the serious
concerns that I and others have about this proposed merger.
Many questions remain. So today, Mr. King and Mr. Rogers must
provide clear answers to the members of the committee and the
public on these important issues, and I look forward to hearing
from our witnesses.
The Chair now recognizes the ranking member of the
committee, the gentleman from North Carolina, Mr. McHenry, for
4 minutes for an opening statement.
Mr. McHenry. Thank you. And I want to thank our witnesses
for appearing today.
I have noticed a trend in this committee this year: We seem
to be on a buyer's remorse tour. First, we had a hearing with
the seven top CEOs of global systemically important banks that
focused primarily on their approvals, their overall size, and
their recent growth. Next, the committee advanced legislation
that would limit the independence of the Consumer Financial
Protection Bureau (CFPB).
And today, we are examining the potential merger of two
institutions that have pointed to the post-Dodd-Frank
regulatory landscape and the cost of compliance as one of the
drivers behind their decision to merge. I can't help but
believe this is another example of buyer's remorse on the part
of my Democrat friends.
It was Dodd-Frank and the resulting 400 new financial
regulations that have forced consolidation in the financial
services industry. It is my colleagues on the other side of the
aisle who have made the largest banks larger, while suffocating
smaller institutions. Since the financial crisis, the Fed has
approved 1,812 mergers of banks. This is the first hearing of
this kind in the last 20 years in this committee.
Despite the rhetoric, the Democrats have solidified the
reality that size equals survival. We will undoubtedly hear
today about shortcomings of the bank merger process. And for
the record, transparency is a prerequisite for approving a bank
merger.
Both the Bank Holding Company Act and the Bank Merger Act
clearly outline steps that must be taken. The Justice
Department conducts a thorough review of the impact of
competition and reports on competitiveness to ensure full
compliance with antitrust laws. Federal banking regulators also
conduct studies on competitiveness, looking closely at the
impact to consumers from an institution's footprint. The merger
applications submitted are publicly available, as are thousands
of pages of supplemental information. Public meetings have been
held, and transcripts of those meetings are available online
for all to read.
I remind my colleagues that the last legislative change to
the bank merger process was actually in Dodd-Frank. Democrats
had every opportunity to address whatever shortcomings they
will identify today, but they failed to do so.
This hearing is being held in the middle of a merger
process. Business decisions cannot be made at this time,
because the two institutions remain separate and are compelled
under law from sharing that information.
Unfortunately, I expect my friends on the other side of the
aisle will ask questions that the witnesses are prohibited by
law from answering.
What we do know is this: As part of the Community Benefits
Plan announced July 16th, the new bank has committed to open at
least 15 new branches in low- and moderate-income and majority/
minority communities across its footprint. That is in addition
to the staggering $60 billion committed by the institution to
community reinvestment activities. The regulators are examining
this and many other possible implications of this merger in
detail, which this body is not privy to at this point.
Mergers are grounded in procedure. Concerns are not simply
swept under the rug. I hope my colleagues understand and
respect the limitations under which these folks are testifying
today. I trust the witnesses will be as forthcoming as possible
with the limitations set out in statute.
Furthermore, these two institutions are in essence large
Main Street banks, doing standard non-capital-markets-oriented
business. This is a standard merger process by which the Fed is
well-equipped to deal with the law.
And with that, I yield back.
Chairwoman Waters. The Chair now recognizes the Chair of
our Subcommittee on Consumer Protection and Financial
Institutions, Mr. Meeks, for 1 minute.
Mr. Meeks. Thank you, Chairwoman Waters.
Financial technology is both the problem we are trying to
solve and the solution we are turning to. This merger of is a
good example of that and an important reminder that we must
consider the broader market implications of a rapidly changing
banking landscape enabled in large part by innovations in
technology. Indeed, without developments in technology, it
would not be possible to manage megabanks, to have global
banks, or to engage in branchless banking.
BB&T and SunTrust have argued that the scale and scope of
technology investments is an important factor spurring their
merger. That raises great concerns for me about the future of
community banking, of small banks, and of minority banks.
What we are told is that fintech solutions would add access
and bring financial services to all corners of the market. But
what we are seeing thus far is market consolidation, the
disappearance of small community banks and minority banks, the
rapid growth of banking deserts, and a growing number of
Americans who are unbanked and underbanked.
I yield back the balance of my time.
Chairwoman Waters. The Chair now recognizes the ranking
member of the subcommittee, Mr. Luetkemeyer, for 1 minute.
Mr. Luetkemeyer. Thank you, Madam Chairwoman.
From Main Street to Wall Street, the success of our economy
is driven by economic freedom. The foundation of the American
Dream is the idea that a free market economy will allow
entrepreneurs, business, and workers to succeed.
Over the last decade, increased regulation of the financial
services industry has cultivated an environment where the
survival of a financial institution is intrinsically tied to
its size. Banks across the nation have struggled under the
weight of overregulation, causing a major consolidation in the
industry.
Today, we are hearing from two private companies who have
announced their intention to merge through the prescribed legal
and regulatory process, which was most recently amended by the
2010 Dodd-Frank Act.
We have an important role in overseeing the Federal banking
agencies' evaluation of the proposed merger. However, size is
neither a legally disqualifying characteristic for bank mergers
nor a reason to villainize two companies following the merger
process.
It is the job of this committee to ensure the proposed
merger is thoughtfully and thoroughly reviewed in accordance
with current law. I would caution my colleagues against judging
these two institutions based on any factors outside the legal
process and, instead, ensure these institutions comply with all
legal requirements set forth by Congress and the regulators
examining this merger.
With that, I yield back, Madam Chairwoman.
Chairwoman Waters. And now, I want to welcome today's
panel.
First, Mr. Kelly S. King, chairman and chief executive
officer of BB&T Corporation. He has been with BB&T for 46 years
and has served in senior leadership positions since 1996.
Mr. King is currently expected to serve as chief executive
officer and chairman of the board of directors of the newly
merged bank until September 2021 and to serve in various
capacities thereafter.
And second, Mr. William H. Rogers, Jr., chairman and chief
executive officer of SunTrust Banks, Inc. Mr. Rogers has been
at SunTrust for 39 years, serving in senior positions since
2008, when he was named president.
Mr. Rogers is expected to serve as president and chief
operating officer of the new bank and to succeed Mr. King as
chief executive officer and chairman of the board.
Without objection, your written statements will be made a
part of the record. And each of you will have 5 minutes to
summarize your testimony. When you have 1 minute remaining, a
yellow light will appear. At that time, I will ask you to wrap
up your testimony so we can be respectful of the committee
members' time.
Mr. King, you are now recognized for 5 minutes to present
your oral testimony.
STATEMENT OF KELLY S. KING, CHAIRMAN AND CHIEF EXECUTIVE
OFFICER, BB&T CORPORATION
Mr. King. Chairwoman Waters, Ranking Member McHenry, and
distinguished members of this committee, thank you for this
opportunity to discuss our merger. We really appreciate it.
I have been with BB&T for 47 years. I have been very proud
to be the CEO for the last 10 years.
Our mission is very clear: We want to make the world a
better place to live. We do that by helping our clients achieve
economic success and financial security. We try to create a
place where our associates can learn and grow and be fulfilled
in their work, and we focus on making our communities better
places to live.
We know that SunTrust shares these values as well. So
coming together, two great companies can make the world a
better place.
Our success and our communities' success are exactly the
same. That is why in 2009, BB&T created what we call the BB&T
Lighthouse Project. During this project, our associates go out
with financial support from the bank and try to do community
projects to help the local communities. Since 2009, we have
done over 12,000 projects, we have touched over 18 million
people, and we really have improved the community.
We are very proud of our recent Community Benefits Plan. In
this plan, we will invest $60 billion in loans and investments
to low- and moderate-income borrowers in communities over a 3-
year period of time. This will include $31 billion in mortgage
loans to LMI borrowers, $7.8 billion in small business loans,
and $17.2 billion in community development lending to support
affordable housing development.
I understand how important housing is. I was born in public
housing. When I was 13-years- old, I still lived in a plank
house on a small country farm with no insulation and no running
water. I know the impact of living in insecure housing.
Our new company will remain committed to underserved
neighborhoods. We are committed to opening at least 15 branches
in LMI and majority/minority communities, and we are committed
to increasing diversity and inclusion. It is the right thing to
do, and it makes good business sense. It helps us understand
our markets, makes our associates more effective, and it
improves our overall results.
We understand that there is much work to be done in our
country concerning equal opportunity. We will maintain our
commitment to serving all communities equally and fairly.
We were very excited to join Congresswoman Alma Adams,
Representative of the 12th District of North Carolina, and a
distinguished member of this very committee, in her partnership
challenge to establish strategic partnerships with Historically
Black Colleges and Universities (HBCUs) across this country. We
are also very happy to announce that we are planning next year
to host a leadership forum for HBCU chancellors around this
country to help them become better leaders.
The world is changing very, very fast. Scale is becoming
very important. When I first started in banking, the only thing
that really mattered in terms of the client was the touch
between the banker and the client.
A few years ago, that really started changing dramatically.
Today, technology is much more important. In order to have
really good quality today, you have to have a blended
relationship between touch, which is still important, and
technology. With this combination we will be able to make the
investments and have the skill and the capability to be able to
offer a really high level of trust based on technology and
touch.
We are very passionate about our communities. It is who we
are. In fact, it is one of the cornerstones of this merger.
We get up every morning as bankers thinking about how we
can help our clients achieve their dreams and goals and hopes
in life. But to serve our clients and communities, we need the
scale and capacity to make investments in better technology
with better products and better services. We simply want to
exceed our clients' expectations, we want to invest in
community development, and we want to help create more jobs.
We can only serve our clients in communities with the best,
most talented women and men who have made us what we are today.
We are also committed to helping clients achieve their dreams
and goals and hopes in life. Working together, all of us, we
believe we can make the world a better place to live.
Thank you for this opportunity to discuss our merger, and I
look forward to answering your questions.
[The prepared statement of Mr. King can be found on page 56
of the appendix.]
Chairwoman Waters. Mr. Rogers, you are now recognized for 5
minutes to present your oral testimony.
STATEMENT OF WILLIAM H. ROGERS, JR., CHAIRMAN AND CHIEF
EXECUTIVE OFFICER, SUNTRUST BANKS, INC.
Mr. Rogers. Thank you, Chairwoman Waters, Ranking Member
McHenry, and members of the committee. Thank you for this
opportunity to discuss the proposed merger of SunTrust and
BB&T.
I am Bill Rogers, chairman and CEO of SunTrust bank. I had
the good fortune of joining this bank in an entry-level
position in 1980 and to learn from leaders who believed if you
build your community, you build your bank. At every step of my
career I had the privilege of working with committed teammates
in the service of our neighbors. I now have the distinct
pleasure of leading this purpose-driven company.
Today, we express our purpose as lighting the way to
financial well-being. From the teller and loan officer to every
function, we are motivated by putting clients, communities, and
teammates on the path to financial confidence.
This commitment extends beyond any regulatory requirement.
Fulfilling our purpose is central to everything we do. We have
helped millions of families purchase homes, finance their
children's education, grow their small businesses, and save for
retirement. We have backed great companies, financed community
development, funded affordable housing, and expanded financial
literacy.
I am also proud of the passion and impact of our
philanthropic efforts and workplace inclusion. Just last year,
SunTrust teammates volunteered more than 200,000 hours in our
communities and the SunTrust Foundation granted $19.5 million
to help people.
We have received recognition from numerous organizations
for leading work to advance diversity. We are committed to
becoming an evermore diverse and inclusive company and
therefore a stronger one.
In the area of financial wellness, we have done extensive
research, and we offer a leading financial wellness program to
200 other companies at no profit to SunTrust. So, purpose is
more than words. We put it into practice.
As we think about the future, we are keenly aware of the
need for financial institutions to continue building trust
among Americans that was strained during the financial crisis.
We made serious mistakes during the crisis, and we let our
clients and communities down.
We have made dramatic changes in leadership and processes
in close consultation with our regulators as we seek to earn
the public trust for all of our efforts. This includes our
operations, hiring and compensation practices, value system,
risk management, and community support.
So why the merger? I see the very real economic and human
benefits of our work and want to continue our positive
momentum. The primary reason for merging with BB&T is to team
with a like-minded company whose mission is to make the world a
better place to live. We both believe that our businesses and
public impact will be better together.
To be clear, SunTrust is a strong company with 7
consecutive years of performance improvement. But in today's
fast-changing environment, no successful company can stand
still. We need to provide clients with tailored, intuitive
banking services in the palm of their hand, with access to
expert help, while competition grows by the day, compliance
excellence increases by the hour, and cyber threats grow by the
second.
Our path forward is to align with a partner that values
purpose, sound risk management, and technology, and we found
that in BB&T. Our scale will allow us to compete more
effectively, but also benefits the community we serve. Earlier
this month, BB&T and SunTrust announced a Community Benefits
Plan to lend or invest $60 billion to low- and moderate-income
borrowers over a 3-year period. We also pledged to open at
least 15 new branches in low- to moderate-income neighborhoods.
Given our overlapping markets, we will be thoughtful in
performing a market, branch, and client analysis before moving
forward with any integration, prioritizing our service to low-
and moderate-income clients and communities. We will reach out
to clients to ensure that there is a smooth transition.
With this merger, we plan to bring several hundred
technology support jobs onshore and eventually support
additional hiring. We know that every job matters. While we
have agreed that all performing client-facing teammates and
associates will retain a job, we recognize there will be
impacts, and we will provide best-in-class programs for career
transition and skill upskilling.
Some have suggested this transaction will create an
institution that is too big. With this merger, bigger doesn't
mean riskier. Each company has a conservative risk profile and
will maintain such as the combined entity. We are adding scale,
not complexity.
I have the utmost conviction that this merger of equals
between two great companies positions us to better serve our
clients, our local economies, and all those who count on us.
Thank you, and I look forward to answering your questions.
[The prepared statement of Mr. Rogers can be found on page
63 of the appendix.]
Chairwoman Waters. Thank you both.
I now recognize myself for 5 minutes for questions.
Mr. King and Mr. Rogers, after we made clear this committee
would scrutinize your proposed merger, your two banks announced
a 3-year Community Benefits Agreement last week in which the
new bank will lend or invest $60 billion to low- and moderate-
income borrowers and in LMI communities also. This includes
funding for mortgages, affordable housing, and small business
loans, among other things.
While this seems to be a positive step, I am concerned
about reports that suggest it represents only a $3 billion
increase beyond your most recent Community Reinvestment Act
activity and that this is not a legally binding agreement.
Mr. King, if the regulators require that you fulfill the
$60 billion worth of promises as part of a conditional approval
for the merger, would you object?
Mr. King. Madam Chairwoman, we respect whatever conditions
the Federal Reserve and other regulators impose on this
transaction. We would certainly support any conditions that are
required.
Chairwoman Waters. Mr. Rogers, would you object?
Mr. Rogers. Madam Chairwoman, we would not object.
Chairwoman Waters. Mr. Rogers, SunTrust agreed in 2014 to
pay $968 million over your bank's unlawful mortgage loan
origination servicing and foreclosure abuses. This included
providing relief for 48,000 consumers who lost their homes.
When it mattered the most for thousands of struggling
homeowners, SunTrust did not do its job in offering sustainable
loan modifications.
As you attempt to run a bank that is double the size while
laying people off, will you dedicate more resources to loan
modification options and take a much more proactive approach to
helping struggling homeowners?
Mr. Rogers. Chairwoman, no consumer should ever be taken
advantage of. And we have committed already to increase our
resources in the compliance area and in the loan modification
area, and we will continue to do that as part of Truist.
Chairwoman Waters. Thank you.
I am very concerned about servicing, and not only with this
merger and your banks, but in general, I think we have a lot of
work to do in making sure that we have the kind of servicing
that recognizes consumers are coming for help, asking for loan
modifications.
Some of the things that I learned when we went through the
crisis, for example, was there were consumers who approached a
bank and said, ``I cannot make my mortgage payments in the
amount that I have signed up for, and so what I would like to
do is reduce my mortgage payments. I can afford to pay
something.'' For example, if the mortgage payment was $2,000 a
month, they could perhaps pay $1,500 a month.
And they were told that you have to be 2 months in arrears.
And, of course, I think that is not helpful. I think if the
consumer is coming in advance to talk about a potential
problem, instead of saying, wait until you are in default, in
essence, how can servicing--how would you respond to that? In
your modification process, how would you help this consumer?
Mr. Rogers. Chairwoman, I support that every consumer needs
help. Many consumers are struggling today financially, and we
play a role in that. Today, what would happen--
Chairwoman Waters. Do you do your own servicing?
Mr. Rogers. We do.
Chairwoman Waters. Do you require that consumers be 2
months in arrears before you can do a loan modification?
Mr. Rogers. Chairwoman, we comply with the requirements of
the servicing that we have for the GSEs. What happens today is
if a consumer comes to us, they get assigned a representative
who works with them on their individual situation, because
every situation is unique and different and we support
consumers being able to live a financial wellness and--
Chairwoman Waters. I understand that. That is not a direct
answer to my question, and I am really concerned about
servicing and whether or not people in that situation would
require that they have to do a refinance, et cetera, et cetera.
But it seems as if what you are saying is you comply with
whatever you think is supported by GSE requirements, et cetera,
et cetera, et cetera, but you are not specific in an answer to
that question.
That is just one of the many questions about servicing that
I have. I have been very concerned about servicing, whether it
is done by the bank itself or whether it is contracted out. And
we learned during the meltdown that consumers were very much
disadvantaged.
With that, I will yield back the balance of my time.
And the gentleman from Missouri, Mr. Luetkemeyer, is
recognized for 5 minutes.
Mr. Luetkemeyer. Thank you, Madam Chairwoman.
Just a couple of questions quickly to understand the
structure of the new bank that you are going to be forming
here, is this going to be a brand new charter? Or are you
taking your existing charter and just changing it?
Mr. King. Representative, we will be using the BB&T
charter.
Mr. Luetkemeyer. Okay. Is it a State bank charter then, or
is it a national charter?
Mr. King. It is a State, non-member bank charter.
Mr. Luetkemeyer. Okay. So North Carolina will be the State
banking organization that will oversee the bank from the State
bank charter position.
Mr. King. Representative, the primary prudential regulators
will be the State banking commissioner of North Carolina and
the FDIC. The holding company will be primarily regulated by
the Federal Reserve.
Mr. Luetkemeyer. So you will be a member of the Federal
Reserve when you are done with this as well?
Mr. King. We are not technically a member.
Mr. Luetkemeyer. A holding company.
Mr. King. But they will have oversight.
Mr. Luetkemeyer. Okay. Very good.
With regards to the capital of the new bank, are you going
to have to issue any new stock or take any new stockholders in
or is there enough capital between the two banks when you are
merged to be able to make this all work?
Mr. King. Representative, we have plans in place so that we
will have adequate and very ample capital without having to
issue any new capital.
Mr. Luetkemeyer. Are you going to take anyone else on? Are
you going to sell additional stock?
Mr. King. No, we are not--
Mr. Luetkemeyer. Do you anticipate selling additional stock
at this point?
Mr. King. No additional stock will be sold.
Mr. Luetkemeyer. Okay. Very good.
When the two banks merge, obviously you will need to have a
vote of the stockholders. I assume that has taken place? The
stockholders are all in favor of this?
Mr. King. Yes, we are very much in favor of that. A
stockholder vote will be held on July 30th.
Mr. Luetkemeyer. Okay. Very good.
So when you guys are merging, you wind up having to comply
with the Bank Holding Company Act and the Bank Merger Act, is
that correct?
Mr. King. That is correct.
Mr. Luetkemeyer. So there is Federal law in place that
dictates how you do this from now on, and you have complied
with that and you are ready to go basically?
Mr. King. Representative, we comply with every single
requirement of all of those Acts.
Mr. Luetkemeyer. Very good. I appreciate that. I have heard
that two or three times already. You are doing very good, Mr.
King.
With regards to your testimony, you list several reasons
behind the merger. Among those reasons you stated the need to
serve your customers amidst the climate of increased
competition, compliance, and cyber threats.
I guess my question would be, how important was Dodd-Frank
and the additional compliance costs that you had to incur, both
banks, to this decision that you made to be able to basically
cut compliance costs? Was that a significant decision, part of
the decision-making process?
Mr. Rogers?
Mr. Rogers. There was never an attempt to cut compliance
costs, Representative. The benefits of this merger actually is
we will get to increase our investments in compliance and use
technology and other resources to be more effective in
complying with all the regulations.
Mr. Luetkemeyer. I know one of the situations that we have
seen since Dodd-Frank has been instituted, is this mass exodus,
this big merger process, which since the merger we have had
1,812 mergers that have gone through, and we wind up with
basically losing a bank or a credit union every day. And I am
just curious how the Dodd-Frank Act impacted your decision
here?
Mr. King. Representative, the Dodd-Frank Act did not
directly influence this decision, but there has been over the
last number of years an increased level of regulation that has
increased our cost, and our cost increases are a factor
impacting the necessity in doing this merger.
Mr. Luetkemeyer. Okay. What kind of costs are you incurring
to be able to put this merger together? Would you be able to
disclose that? Or is that something you can do?
Mr. King. There will be a number of costs involved in
combining the companies, changing signage, changing computers,
and changing forms. Lots and lots of processes will need to be
changed that are very expensive. That is all built into our
economic forecast as we project to our shareholders and other
constituents the benefits of the combination.
Mr. Luetkemeyer. One of the concerns that I think some
folks in the room have is with regards to size. And I think if
you look at the business models of each one of your banks, they
seem to be very similar. You still will be at a size that not
necessarily can compete against the upper reaches of the
financial services world in this country with regards to
certain capital markets activities. I assume that you don't
intend to do that.
I assume you probably want to keep basically the same
business model you had and continue to be basically just a big
community bank. Is that a pretty good analogy of what I see
happening here?
Mr. Rogers. Representative, I think that is exactly a fair
representation, is we are bringing two low-risk models
together, as evidenced by our relative G-SIB scores, which are
16 and 15 for our respective companies, compared to those in
the hundreds of larger banks. So, these are two lower-risk
profile companies, and we intend to maintain that as part of
Truist.
Mr. Luetkemeyer. Okay. I see my time is up.
I yield back. Thank you.
Mr. Lawson [presiding]. Thank you, sir.
Now, the Chair will recognize the gentlewoman from New
York, Mrs. Maloney, who is also the Chair of our Subcommittee
on Investor Protection, Entrepreneurship, and Capital Markets,
for 5 minutes.
Mrs. Maloney. Thank you, Mr. Chairman.
And I welcome the witnesses today.
Today's hearing is necessary not only because this is the
largest bank merger in recent memory, but also because of the
regulators' apparent lack of interest in meaningful public
participation in the merger review process. There is already a
lack of confidence in the merger review process because the
regulators seem to be only as rubber stamps by simply approving
every merger that comes before them. But the utter disregard
for community input, evidenced by both the Fed and the FDIC at
the two so-called public hearings, is particularly troubling to
me.
So let me ask you, did you both testify at the public
hearings in Charlotte and Atlanta?
Mr. King, yes or no?
Mr. King. Representative, yes.
Mrs. Maloney. Mr. Rogers, yes or no?
Mr. Rogers. Yes.
Mrs. Maloney. Were you asked a single question by any
regulator in attendance, yes or no?
Mr. King?
Mr. King. No.
Mr. Rogers. Representative, we were not asked a question.
Mrs. Maloney. Would it surprise you to learn that not even
a single member of the Board of Governors at the Fed or the
Board of the Atlanta Fed or the FDIC Board attended either the
hearing in Charlotte or the hearing in Atlanta, or that the
hearing was not live-streamed and that there is absolutely no
digital record of it? I think it is an insult to the public and
shows that the regulators don't take this hearing process
seriously.
There were over 100 community group witnesses on 21
different panels at the 2 hearings, and yet not one single
decision-maker from the Fed or the FDIC was there to hear them
or to participate or to take notes or to participate in any
way.
Mr. Chairman, I am going to suggest that the Fed and the
FDIC pause their review of this merger until they can have
hearings where the actual decision-makers hear directly from
the public about the suggested merger. But it is this lack of
interest by the regulators that forces us to have this hearing
today so we can talk to you about the issues the public really
cares about in this merger.
So now let's talk about one of those issues which the
public cares deeply about, and that is gun violence. As you
both said, this is a merger of equals, which means in some
cases, BB&T's policies will win out, and in other cases,
SunTrust's policies will win out.
One area where the two of you disagree and have very
different policies is in how you engage with the gun industry.
SunTrust has a very careful screening process where different
committees examine the transaction, and transactions with gun
manufacturers are almost always denied.
BB&T, on the other hand, has no specific gun policy and has
actually done a substantial amount of business with the gun
industry. Between 2012 and 2017, BB&T arranged over $147
million in loans to gun companies, and this is according to the
research from Guns Down America.
Mr. King, this industry is responsible for the deaths of
thousands of Americans every year. It has been described as an
epidemic. We are one of the few countries where we literally
have violence in our schools and mass shootings. We have an
epidemic in this country of gun violence. And by continuing to
lend money to the manufacturers of military-style assault
weapons and magazines, your bank is contributing to this
horrible, I would say, epidemic in our country.
So, Mr. King, my question is, will you commit to adopting
SunTrust's responsible lending policies when it comes to
business relationships with the gun industry?
Mr. King. Representative, we abhor all forms of violence.
We are saddened by the tragedies that are happening around our
country today with regard to gun violence and all of the forms
of violence, especially when it affects our youngest children
in the schools. It makes me personally very, very sad.
Mr. Lawson. The gentlewoman's time has expired. Thank you.
Our next--
Mrs. Maloney. Would the gentlemen be able to answer this
question? Will he follow SunTrust's policies or ignore them? I
am just curious.
Can you answer yes or no? Will you follow SunTrust's
policies?
Mr. Lawson. Mrs. Maloney, the time has expired.
Mrs. Maloney. Okay. I yield back.
Mr. Lawson. Thank you.
I now recognize the gentlewoman from Missouri, Mrs. Wagner,
for 5 minutes.
Mrs. Wagner. I thank the Chair for yielding.
Dodd-Frank, let's be very clear, created a world in which
size equals survival. The Democrats' law reduced competition in
the banking sector. It imposed barriers to entry for de novo or
new charter banks and saddled financial institutions with
approximately 400 new requirements that hit small, mid-sized,
and regional banks particularly hard. In short, Dodd-Frank
concentrated more risk in the nation's largest institutions and
incentivized them to be as large as they are today. That is the
direct result of Dodd-Frank.
I have some questions, some yes or no, for both of you. We
will do a little rapid fire here, and there will be an
opportunity for you to elaborate also, gentlemen.
Mr. King and Mr. Rogers, is there sufficient competition in
banking? Yes or no?
Mr. King. Yes.
Mr. Rogers. Representative, yes.
Mrs. Wagner. What about among community and mid-sized
institutions, sufficient competition?
Mr. King?
Mr. King. Yes, Representative.
Mr. Rogers. Representative, yes.
Mrs. Wagner. Now you can elaborate a little bit. Mr. King,
how has competition changed since Dodd-Frank? And what would
competition look like a decade from now?
Mr. King. Representative, that is an excellent question.
Competition has changed dramatically since Dodd-Frank, and it
is primarily around the dramatic changes in technology.
Our world is changing really, really fast. We all see that
through Amazon and other changes in the retail industry and
other industries. It is profoundly changing our industry.
As I said in my opening statement, historically, for most
of my career in banking, if you had a good branch-friendly
touch type of relationship with your clients, that was
satisfactory. That is no longer okay. Today, you have to have
huge investments in technology to meet the requirements of
consumers, which is real-time satisfaction.
Mrs. Wagner. Mr. Rogers, could you briefly talk about that?
Mr. Rogers. Representative, thank you.
I would say also the competition is not only from banks.
The competition has also come from fintech companies.
Mrs. Wagner. Yes.
Mr. Rogers. It has come from a variety of different
outlets.
So the ability to compete, as Mr. King described, from a
technology standpoint and a service standpoint, it is not just
banks. It is that the field of competition has expanded quite
significantly.
Mrs. Wagner. So competition has changed, most particularly
for community and midsized institutions.
In your industry broadly, Mr. King, what effect has Dodd-
Frank had on community and regional banks?
Mr. King. Representative, I believe Dodd-Frank, broadly
speaking, has increased the requirements in terms of all of our
activities. It has increased our costs.
Now there are many aspects, I should quickly say, that are
very good about Dodd-Frank. So, I am not ridiculing the entire
bill. I am saying that it did, in fact, increase our costs.
Mrs. Wagner. And what kind of effects did this have as a
result on consumers?
Mr. King. The effect on consumers, Representative Wagner,
is to cause the process to be more burdensome in terms of time
and documentation in many cases, especially in the mortgage
area. And as a result of that, it drives up our costs, and in
some cases that cost is passed along to--
Mrs. Wagner. Mr. Rogers?
Mr. Rogers. I think, Representative Wagner, that there are
many things in Dodd-Frank that were positive for our industry
in terms of elements like stress tests and building more
capital in the banking system which makes us much more solid
today than we were pre-crisis.
Mrs. Wagner. Are consumers better off now than they were 10
years ago?
Mr. King?
Mr. King. Representative Wagner, I would say in some cases
they are, and in some cases they are not.
Mrs. Wagner. Mr. Rogers?
Mr. Rogers. Representative, in some cases I believe
consumers are having much more access to technology. And I
think the reasons we are here to talk about this merger is to
be able to invest in the type of activities that will benefit
consumers going forward.
Mrs. Wagner. That is certainly what I care about, the
benefit and the cost to consumers, and to those consumers who
are in Missouri's Second Congressional District.
What do you believe, briefly, in my time I have left, are
some of the greatest issues facing regional banks today?
Mr. Rogers?
Mr. Rogers. I think some of the greatest issues are related
to cyber threats, being able to invest and keep up, being able
to invest and keep up with the largest banks in the country, to
be competitive in products and services and capabilities.
Mrs. Wagner. Mr. King?
Mr. King. I would say I agree with Mr. Rogers. Cyber is
number one. Very much related is having the scale to be able to
invest in the technology, to be able to provide the kind of--
Mrs. Wagner. The scale, did you say?
Mr. King. The scale.
Mrs. Wagner. The scale. So size--
Mr. King. Size.
Mrs. Wagner. --sadly, is equaling survival.
I yield back. Thank you.
Mr. Lawson. Thank you.
At this time, I am going to recognize the gentlewoman from
New York, Ms. Velazquez, for 5 minutes.
Ms. Velazquez. Thank you, Mr. Chairman.
Mr. King, you didn't have the opportunity to answer Mrs.
Maloney's question, and I believe that it is an important
question. So would you adopt SunTrust's policies on business
with the gun industry, yes or no?
Mr. King. Representative, our policy is to try to help our
clients achieve economic success and financial security
according to the laws of the land.
Ms. Velazquez. So, that is a no.
Mr. King and Mr. Rogers, under the proposed merger, will
all of those employees who are looking to stay with the new
institution be able to stay?
Mr. King. Representative, we made a pledge on day one that
all of our performing, client-facing associates will have a
job.
Ms. Velazquez. Is that all?
Mr. King. It is performing, client-facing people who deal
directly with clients.
Ms. Velazquez. Yes, but I am asking about all of the
employees who want to stay. Will they be able to stay?
Mr. King. Representative, there will be changes in
combining the two companies.
Ms. Velazquez. Okay. Thank you.
Mr. King. And during these changes--
Ms. Velazquez. Thank you. I hear you.
Mr. Rogers?
Mr. Rogers. Yes, there will be changes and some
consolidations. Some employees won't want to move to a
different geography. Some may not have skills for a different
job.
Ms. Velazquez. Okay. Thank you. I hear you.
So for those who might need to relocate, what kind of
assistance will be provided to them?
Mr. Rogers. We have an excellent relocation package. We
have merged the best of both companies and created, I think, an
exceptional relocation package.
Ms. Velazquez. And for those employees who have the
unfortunate luck of having to look for a new job, what type of
compensation assistance will be provided?
Mr. Rogers. We have a severance package, which is 2 weeks
for every year of service with a minimum of 8 weeks. But, most
importantly, each impacted employee will get outplacement
services. They will get one-on-one coaching and the ability to
find a job someplace else.
Ms. Velazquez. Thank you for that answer.
Mr. King, for 2017, BB&T's CEO pay ratio, which measures
the discrepancy between your annual compensation and that of
the median employee at your bank, was a remarkable 150 to 1;
while, Mr. Rogers, the CEO pay ratio at your bank for 2017 was
even wider, 159 to 1. Most Americans find these ratios
unacceptable.
Do you believe these ratios are fair, Mr. King?
Mr. King. Representative, my compensation is established by
our board--
Ms. Velazquez. I know.
Mr. King. --with the advice of an outside consultant and it
is aligned with the long-term performance of the company.
Ms. Velazquez. Mr. Rogers?
Mr. Rogers. Representative, I have been very fortunate. I
started my career with this company. And I want to provide that
same kind of opportunity to anyone who starts with Truist that
they have that same--
Ms. Velazquez. What about if we start raising their
salaries?
What is the starting salary at each of your banks right
now? And then, under the new institution, what will be the
starting salary of an employee?
Mr. King. Representative, we recently raised our minimum
compensation to more than twice the Federal minimum wage.
Ms. Velazquez. And that is?
Mr. King. That is a little over $15, which is about
$31,000--
Ms. Velazquez. Okay. I know that Bank of America also
headquarters in Charlotte, and they just announced that they
committed to raise the minimum wage to $20. Would you both be
committed to raising the minimum wage to $20?
Mr. King. Representative, we study that all the time. Each
institution is different in terms of their location, and what
the cost of living is in terms of their employees and where
they live. We study that all the time. We want to be sure we
are paying--
Ms. Velazquez. Will the merger produce savings by reducing
the number of employees at the new institution?
So do you think it is fair to use that money to raise the
salary for those--the starting salaries of your employees so
that we reduce the wage gap that exists between the CEO and
those employees?
Mr. Rogers. Representative, when we merge, we have elected
to pay $71 million in compensation to anyone of a certain level
in our company to send the positive message that we care about
them and we care about their future.
Ms. Velazquez. How about you care about those with the
starting salary, those who are making only--
Mr. Lawson. The gentlelady's time has expired.
Ms. Velazquez. --$15 minimum wage?
Mr. Lawson. The gentlelady's time has expired.
Ms. Velazquez. I yield back.
Mr. Lawson. Thank you.
I now recognize the gentleman from Michigan, Mr. Huizenga,
for 5 minutes.
Mr. Huizenga. Thank you, Mr. Chairman.
I appreciate the opportunity, and I appreciate you
gentlemen coming here.
I am just trying to do a little research. You are hearing
the other side who clearly wants to have a system of smaller
banks in the belief that somehow it is magically safer. I am a
car guy from Michigan. We have all the Tier I, Tier II, and
Tier III automotive suppliers, and we watch that industry
pretty closely.
I was consulting with my friend, the preeminent car dealer
of Texas, right down here in the row ahead of me. Don't give
him an opportunity. He will try to sell you something.
But we were talking a little bit about sort of the analogy
between banking and automotive, and it seems to me that we have
some examples where bigger isn't necessarily better, but
smaller isn't necessarily better.
And sometimes, both can be excellent. Two German cars,
where you have BMW and Volkswagen, they are drastically
different in size, drastically different when you are even
Chrysler or the old iteration of Chrysler to GM, very different
in size. And it really is about risk-taking. It is about
management. It is about a number of those other things.
And as I was looking at the makeup of your two banks--and I
have to admit, from Michigan, neither one of you have branches
in Michigan. I think the closest that anyone gets is BB&T, with
some branches in Ohio and Indiana, and the only connection
really with SunTrust is all the Michiganders who go down to
Florida in January, February, and March. So, I am familiar with
SunTrust that way.
But according to 2018 records, BB&T, you had $225 billion
in assets. SunTrust had $216 billion. And as I was looking at
that, it just struck me how significant a gap there is between
the truly large financial institutions that we have here in the
United States, $2.7 trillion for JPMorgan Chase, Bank of
America $2.3 trillion, with a ``t,'', that is 12 zeros for
everybody watching, Citibank, $1.9 trillion, Wells Fargo, $1.8
trillion. Then, the fifth largest bank is Goldman Sachs, $925
billion, which wasn't a bank until Dodd-Frank made it a bank.
Morgan Stanley, $875 billion--again, it wasn't a bank until it
was made a bank. And then, it drops down to U.S. Bank at $475
billion.
Your merger is going to put you somewhere between sixth,
maybe seventh, maybe eighth, depending on what is going to be
happening. And I think it was you, Mr. King, in your testimony
on page 6, you talked about this, and when Mr. Luetkemeyer
touched on it, your systemic risk testing scores received a 15
and 16, respectively, while other institutions scored well over
400, more than 20 times riskier than your particular
institutions, is that correct?
Mr. King. Representative, that is exactly right, and that
is because of the major differences in the way we operate.
Both of our companies are what we call Main Street banks.
We basically serve the--
Mr. Huizenga. In a common vernacular, it might be plain
vanilla.
Mr. King. Plain vanilla.
Mr. Huizenga. So, you are not doing exotic things
internationally?
Mr. King. We are not doing international transactions. We
are not doing exotic types of domestic transactions. We are
focusing primarily on the businesses and consumers in our
market.
Mr. Huizenga. And that is why you have 15 and 16 on your
scores, is that right, Mr. Rogers?
Mr. Rogers. That is correct. Those scores are based on
international exposure and interconnectiveness and other
elements that just don't exist with the risk profile of our
individual banks or our proposed combined bank.
Mr. Huizenga. So, you are not Goldman Sachs. You are not
Morgan Stanley.
Mr. Rogers. Representative, that is correct.
Mr. Huizenga. You are not JPMorgan Chase. You are not Bank
of America. You are not Citibank. You are not trying to compete
internationally with large major institutions around the world.
Mr. King. Representative, that is exactly right. But what
we do is very much needed in our country today.
Mr. Huizenga. As a small business owner, I wholeheartedly
agree. And as my seconds are ticking down, that is the kind of
banking service that we need as small business owners and as
entrepreneurs.
Mr. Lawson. The gentleman's time has expired.
Mr. Huizenga. I appreciate your time. Thank you.
Mr. Lawson. Thank you.
Now, we are going to hear from the gentleman from New York,
Mr. Meeks, who is also the Chair of our Subcommittee on
Consumer Protection and Financial Institutions. You are
recognized for 5 minutes.
Mr. Meeks. Thank you, Mr. Chairman.
Mr. King, Mr. Rogers, thank you for being here today.
As I said in my opening statement, I am concerned about the
future of banking. The banking landscape is changing rapidly,
and I expect that the pace of change will accelerate moving
forward.
So my concern then is with all the mergers, et cetera, will
there be a space? In fact, what will be the place for community
banks and minority depository institutions in the American
banking landscape and future? And how would those small banks
be competitive in a market where the scale and technology
investments dominate as your merger would do? I ask both of
you.
Mr. King?
Mr. King. Well, Representative, your concern is shared by
us. There are a lot of changes going on in the world today that
are impacting our industry that make it very challenging for
banks like us and, frankly, smaller institutions to be able to
survive and thrive.
We are competing against very large Wall Street firms, and
they have the scale and capacity, particularly in technology,
to make it very difficult for us. That is exactly why we need
to combine to be able to have the scale and capacity to be able
to compete effectively in our markets.
Mr. Meeks. Mr. Rogers, do you want to add anything to that?
Mr. Rogers. Representative, I believe that the banking
ecosystem has room for many sized banks with many different
objectives. Our job is not to exclude community banks. We think
they can continue to be competitive, minority banks can
continue to be competitive, we want to support CDFIs, because
they are all part of that community ecosystem of which we are a
part.
Mr. Meeks. So what I am seeing is, because sometimes--and I
said fintech solutions offer promise--but also, this crowding
of markets with an abundance of options is good for some, but
my concern is about those who are left behind--the elderly,
rural communities, urban poor, banking deserts, they are left
behind.
The other concern I have is in regards to small-dollar
lending. I am concerned about the number of American families
caught in payday loan debt traps. Forty percent of Americans
cannot afford a $400 emergency without selling something or
borrowing money. And the CFPB rescinded the ability-to-repay
requirement, which I think would have been critical to stop the
cycle of debt traps that is bankrupting many Americans.
How can we get more banks? How would you get more actively
engaged in small-dollar lending to break this harmful cycle of
debt traps and payday lending if your merger went through?
Mr. King. Representative, we are very concerned as well. We
are working on several things to try to help with regard to
that, and, frankly, our combination will allow to us do even
more.
We are very much in favor of having a small-dollar
affordable loan program, and we are making efforts to try to
get that approved by the regulators to be able to do that. That
is a very important need today.
As Mr. Rogers said, we believe one of the ways we can help
the smallest communities, in addition to our own presence--and
by the way, our combined institution will have more rural
community branches than all the top 4 banks by size combined.
So we too are a community back and we will continue to serve
the small community.
But we want to support them in different ways. CDFIs are
one of the most important ways to meet small businesses and
other community needs in those areas, and we want to find ways
to support the CDFIs as a part of this process.
Mr. Meeks. Let me ask this one more time, because I have
asked it already. The prudential regulators are considering a
process to modernize the CRA, which is important, and generally
you had a physical bank located someplace else. So I am
concerned that CRA compliance is increasingly being decoupled
from community outcomes. What would you say? How would you look
at the implementation or the modernization of CRAs so that does
not happen?
Mr. Rogers. I think, Representative, that is an excellent
point, and I think modernization of CRA often gets confused
with lessening of CRA. We are actually very much in support of
modernization of CRA so we can do more and we can do it better
and we can do it more effectively.
I think there are many opportunities to put forth
technology solutions and other ways of reaching communities
that can't be reached physically, and I think one of the
benefits of this merger is our opportunity to do that.
Mr. Meeks. Thank you.
I only have 2 seconds, so I yield back the balance of my
time.
Mr. Lawson. Okay. Thank you.
Now, I recognize the gentleman from Wisconsin, Mr. Duffy.
Mr. Duffy. Thank you, Mr. Chairman.
Welcome, gentlemen. I am up here on your left-hand corner.
If you guys follow the law, you work with the regulators,
and you work with the Department of Justice, and you get
approval, do you think that this merger should go forward?
Mr. King. Representative, I absolutely do.
Mr. Duffy. Mr. Rogers, do you believe so?
Mr. Rogers. Representative, I do, yes.
Mr. Duffy. So let's say that there are a few people in
America who are going to protest and say this is a horrible
merger, bigger banks are bad, smaller banks are better, that
Congress needs to intervene and say this shouldn't take place
even though you followed the law.
Would that be fair to you, Mr. Rogers?
Mr. Rogers. Representative, I think we will follow the
law--
Mr. Duffy. Would that be fair?
Mr. Rogers. I don't think that would be fair. Because I--
Mr. Duffy. I don't think so either. If you follow the law,
the Congress shouldn't intervene and say, oh, no, Mr. Rogers
and Mr. King, your two banks can't merge. But, guess what, Mr.
Rogers, you have policies in your bank that say if we have
detention facilities that are caring for children or detaining
individuals who we may not know who they are, following
American law, you say I am not going to bank them. Is that
fair?
Mr. Rogers. Representative, we consider a variety of
factors--
Mr. Duffy. Is it fair?
Mr. Rogers. --in making those decisions.
Mr. Duffy. Is it fair?
Let me ask you a different--do you think that detention
facilities are concentration camps? Yes or no?
Mr. Rogers. Representative, I have never used that
characterization.
Mr. Duffy. Okay. How about ICE, are ICE Nazis?
Mr. Rogers. Representative, I have never used that
characterization--
Mr. Duffy. So you have ICE and you have some of their
contractors that are following American law, and you-all tell
us, I want to keep Americans safe. On the banking side, we are
not a risk to anybody. But Mr. Rogers, you like, no, I want
open borders. I don't want us to detain anybody in America. I
don't want us to follow the law. Open borders, let everyone
come in without any processes.
Is that your position at SunTrust?
Mr. Rogers. Representative, we are not taking a social
position.
Mr. Duffy. You are not taking a social position when you
say you won't bank a detention facility?
Mr. Rogers. Representative, we consider a variety of
different factors in reaching those conclusions related to the
status of that business, the creditworthiness, the
survivability of those businesses and--
Mr. Duffy. So a contract with the U.S. Government, you
don't seem to be a good risk. Come on. You are making a social
policy judgment, and you are saying, because I was protested or
because I have a social viewpoint, I am not going to bank a
detention facility that, by the way, some of them hold minors
and we don't know where to send these children. We have to wait
and find an adult who will take the child. And we have to hold
them--
Do you want us to send them out on the streets? And you
say, no, no, I am not going to fund a detention facility that
might hold kids before we can find an adult to take the child;
that is opposed to our social policy. Or, I don't know who is
coming. Are they terrorists? Are they drug dealers? Are they
gang members? We don't want America to hold them. We want them
released in our community. That is the position of your bank,
and I guess that concerns me. That concerns me.
And I would give kudos to BB&T, Mr. King, you say, if you
abide by the law, we will bank you, if you are a good risk. If
you go through the banking procedures, the risk analysis, and
if you follow the law, you can do business with us. And I think
that is the right model. Just like I don't think we should
sandbag this merger because some people don't like it. If you
follow the law, and by the way, I support your merger, I think
you will be a great bank together. I think you have two great
businesses. It should happen if you follow the law.
And you should bank, Mr. Rogers, everyone who follows the
law.
One other point. I only have a minute left.
You asked about pay ratios. I don't know if you guys have
done the analysis on the pay ratio of the lowest paid employee
with the Lakers and, you know, LaBron James, or with the Green
Bay Packers and Aaron Rogers. Those pay ratios are huge. But
guess what? You pay for performance. And if you two can't
defend your pay, you can't look up here and say we should
defend it.
The best talent and the best banks rise to the top. And we
want the best talent there, because when we don't have great
talent, bad things can happen like what happened in 2008.
And so maybe you are not paid enough; maybe you are paid
too little. But you should be able to come in here and say, ``I
am worth every cent.'' Just like LeBron James and Aaron
Rodgers, they are worth every cent they are paid. And if you
can't defend it, we won't defend it for you. But there are a
lot of spaces we can look at pay ratios that would look a
little out of whack.
Get people on the wrong end of the banking industry, they
don't end at 15, they start at 15. And, again, to the two of
you, I--
Mr. Lawson. The gentleman's time has expired.
Mr. Duffy. And good luck to the both of you, but hopefully
you bank all legal--
Mr. Lawson. The gentleman's time has expired.
Mr. Duffy. --in America. Good luck.
Mr. Lawson. I now recognize the gentleman from Georgia, Mr.
Scott.
Mr. Scott. Mr. Rogers, how are you?
Mr. Rogers. Representative--
Mr. Scott. I must say, Mr. Rogers, when I first heard of
this merger and you are moving your headquarters from my
beloved State of Georgia up to another beloved State in North
Carolina, but not quite as loved as Georgia, it literally broke
my heart. And it broke the heart of a lot of folks in Georgia.
And that is largely because of the rich history, the legacy,
all of the great things that you have done to make Georgia and
Atlanta that shining light on the hill that enabled the whole
world to see our great works.
But right now, I want to ask the first question, because I
am sure the people of Georgia would want to know, first of all,
how many jobs would Georgia lose with this merger?
Mr. Rogers. Representative, thank you for your kind
comments about our heritage.
We don't know the exact number. As you know, with this
merger, there are things that we cannot discuss and cannot
fulfill--
Mr. Scott. Let me ask you this now. Let me get a little
specific. I read some material here.
For example, you two have stated that you will have 740
SunTrust and BB&T branches located within 2 miles of another
branch, making them key targets for closure. You are not going
to have one bank branch 2 miles from another, 740.
So my question is, how many of these branches that are
located within 2 miles of another branch are in the greater
Atlanta, Georgia, area?
Mr. Rogers. Representative, I would have to get back to you
with that exact number. We will reiterate what we said earlier,
that for every branch teammate who is facing a client, we have
assured them that they have a job. So for those who are in
branches, they are not in fear of losing their jobs.
Mr. Scott. Those who are in branches are not in fear of
losing their jobs? How can you say that when you have 740
branches just 2 miles apart? Are you are going to keep all of
those open?
Mr. Rogers. Representative, the nature of our business is
we have about a 28 percent turnover annually in terms of those
businesses. So we are able to say with confidence to the
employees who are in those branches that if we do consolidate
their branch, there will be another opportunity in another
branch, hopefully in close proximity, for them to be employed.
Mr. Scott. You use the term, ``client facing,'' that those
job losses will be minimal.
What do you mean by ``client facing?''
Mr. Rogers. Representative, client facing is someone who
interacts directly with a client every day. So if you think
about a--
Mr. Scott. A bank teller?
Mr. Rogers. You think about a bank teller, you think about
a loan officer, you think about the people who interact every
day with our clients.
Mr. Scott. How many people in Georgia, do you know, would
require relocation, leave our State?
Mr. Rogers. Representative, I don't know that number today,
because some of those decisions haven't been made yet about
what official jobs, and duties, and responsibilities may be in
Georgia or may be in other parts of our country.
We did, however, commit that large parts of our business,
our wholesale business, for example, our corporate business,
will be headquartered and located in Atlanta.
Mr. Scott. Okay. And finally, I want to ask you, I was home
over the weekend. My brother-in-law, Hank Aaron, who is with
the Braves asked me, ``What is going to happen with the name of
this stadium?'' Hank, of course, works up there, along with a
lot of other people. And that stadium is in my district, along
with Barry Loudermilk's district. It is the major economic
engine in that area. You made a big commitment there.
So we want to know, because we are on our way to the World
Series, and that is important. So what will my constituents in
Cobb County now call the home of the World Champions, Atlanta
Braves?
Mr. Rogers. Representative, we have no better relationship
than with the Atlanta Braves. And we have every intention of
working closely with them to rename that park associated with
our new name.
Mr. Scott. What will the name be?
Mr. Lawson. The gentleman from Georgia's time has expired.
Mr. Scott. Home of the Braves.
Mr. Lawson. I will get my composure back.
The gentleman from Ohio, Mr. Stivers, is recognized for 5
minutes.
Mr. Stivers. Thank you, Mr. Chairman.
Good morning. Thanks for being here.
I want to focus my questions on the impact of your merger
on customers, because I think that is what this should be all
about.
This merger will give you more scale. It will give you a
chance to be more competitive. It will give you a chance to
invest in some things. In your written testimony, you spoke a
little bit about how you will be able to invest in technology.
Can you talk about how that will serve your customers of
the new combined organization?
You can start, Mr. King, and maybe both of you can comment
on it a little bit.
Mr. King. Thank you, Representative.
The world has changed so much today that the investment in
technology is required to provide what I call real-time
satisfaction. So for consumers today and small businesses, it
is absolutely a requirement that they be able to do what they
want to do, when they want to do it, where they want to do it,
right here, right now. That is a really huge change. And
massive amounts of technological investment dollars are
required to be able to meet that need.
By combining these companies, we will be able to make those
types of investments and have not only what is required but
hopefully be able to meet and even exceed the expectations of
our business clients and consumers.
Mr. Rogers. Representative, I would support what Mr. King
said. The consumer is in charge. And their demands are
increasing exponentially based on their interactions with
businesses outside of financial services. And it is imperative
that we meet that standard that is set by others, because that
is what the consumer expects of us.
Mr. Stivers. Many observers believe the biggest threat to
our financial system today is cybersecurity. Will this merger
give you the ability to invest more in cybersecurity readiness?
Mr. King. Representative, it will indeed. We have increased
our investment in cybersecurity risk mitigation, but we will
increase it even more with this combination, because we will
simply have the scale to be able to afford to do it.
Mr. Rogers. Representative, that was one of the very first
things that Mr. Kelly and I talked about when we thought about
this merger, because we had a very shared view about the
importance of providing security for our consumers and our
customers and our employees. So, cyber will be a big focus and
a strong area of investment and opportunity.
Mr. Stivers. Tell me how you will be able to invest more in
our communities. I think your commitment is $60 billion over
the next 3 years in low- and moderate-income communities after
the merger.
Does this combined organization give you the scale to be
able to do more in low- and moderate-income communities? And
what does that mean toward helping those folks in low- and
moderate-income communities achieve the American Dream?
Mr. King. Representative, the way I think about that, the
way we think about that, is to help these communities, which we
are deeply committed to, is to first provide better housing.
As I alluded to in my opening statement, when you have
housing insecurity, it is very difficult to meet the day-to-day
requirements of trying to just live and to hold down a job.
The second is to have better jobs. And the third is to have
better education. And we are deeply committed to housing, new
jobs, and education for all of our communities, but especially
our smaller, rural community areas.
Mr. Rogers. Representative, when Mr. King and I first
started talking about this merger, we coined a phrase that it
had to be for something, so not just to achieve efficiencies
but to improve the lives of the communities that we serve. And
that has been our commitment day one from the dialogue with
this merger. And I think as evidenced by the community benefits
plan, but that is just one step. This will be a cornerstone of
the approach that we take with our great new company.
Mr. Stivers. Great. And I appreciate your commitment to
improving the lives of the customers that you serve.
And I think, Mrs. Wagner, when she started, talked about
the very competitive environment that you work in and serve in
and work with customers in, and you have some competitors that
have different advantages.
And, unfortunately, the regulatory environment that we live
in has forced you to gain scale, to get efficiency and be able
to invest in not only technology, but our communities. But I
think together you are going to be a great company, and I
appreciate your commitment to serving your customers. And I
hope you will keep that at the forefront, not just in the
merger, but all the way going forward. And I know, given the
competitive landscape you compete in, you will have to keep
that in the forefront.
Thank you. I yield back.
Mr. Lawson. Okay. Thank you.
Now, the Chair recognizes the gentleman from Massachusetts,
Mr. Lynch.
Mr. Lynch. Thank you, Mr. Chairman.
Gentlemen, it's good to see you. I am worried about the
trend. I understand what you are faced with. But as Mr. Scott
pointed out, BB&T has 1,800 branches, and SunTrust has 1,100
branches. As he noted, you have 740 branches that are less than
2 miles apart.
We all know, and you have conceded that there will be
changes in consolidation. Branches are going to close. Probably
half of these that are so--well, when you have 740 banks, 2
miles apart, some of those banks are going to close.
And what I worry about is the choices of the consumers in
that area. You are in a pretty consolidated geographical area,
most of your banks. And so consumers are going to be in a less
flexible environment if this merger goes through; they are
going to have to go to your bank. And I just worry about
pressure on the interest rates and loan opportunities.
I see that BB&T is into mobile banking. Is SunTrust into
mobile banking as well?
Mr. Rogers. Representative, we are.
Mr. Lynch. Yes. And I understand that is consumer
preference. But what is happening here is my community banks
are going to go out of business. And I know that is what you
are faced with right now. But this is the road we are going
down.
Small credit unions are going to go out of business. They
don't have the money to launch these mobile banking platforms.
Smaller community banks don't have that opportunity as well.
I have heard my Republican colleagues blame the Democrats
for making banks bigger. But then at the end of their comments,
they all speak in favor of making the banks bigger. You can't
have it both ways.
And so we all represent some areas that are suburban and
rural. I worry about those communities when those banks go
away. Think about that. Think about how generous and good a lot
of the smaller banks are and how interwoven they are into the
fabric of our communities.
And I am not saying you are doing this by choice. I think
you are probably doing it because you think you have to. But
you are still going to be a pretty big bank, probably the sixth
biggest in the United States, but that doesn't mean it is a
good thing for the consumer or for the towns or cities that you
are located in. That is my problem.
And if we approve this or signal approval for this, there
are going to be a couple more bankers coming in here in a few
months with another merger, and these banks are going to get
bigger and bigger.
And I just don't think--the antitrust formula that has been
approved by the Supreme Court doesn't recognize the damage to
consumers and the damage to communities. They just look at a
very limited set of factors.
I am not blaming you, but I am saying that what you are
asking for contributes to the problem.
And it is going to require another couple of banks, after
you get approved--and I notice that--I think it was the Fed
that raised the amount of money, the number of assets that
would trigger higher regulatory scrutiny, and I imagine that is
a factor in this as well.
But we are just going to have fewer and fewer banks out
there, greater concentration. I don't think it is good for
America. I don't think it is good for the American people. I
don't think it is good for the fabric of our society to have
this happen. And it is putting more and more power in fewer and
fewer hands. That is the problem.
And that is the problem with Facebook. That is the problem
with Amazon. It is actually antidemocratic. I don't want to lay
this all in your lap, but this is part of the problem. What you
are trying to do right here today is part of the problem. You
were forced to do it. I understand that. You didn't make this
up. You are just responding to conditions.
But, I don't even have a question for you. I just think you
are doing what you have to, so I am not going to beat you up
over it. But I am just pointing out that this is wrong. This is
the wrong direction for this country to be going in. It is not
good for the American people, not good for the American
consumer, takes more power away from them and puts them at the
mercy of larger and larger banks.
I yield back.
Mr. Lawson. Thank you.
The Chair now recognizes the gentleman from Kentucky, Mr.
Barr.
Mr. Barr. Thank you, Mr. Chairman.
Mr. King, Mr. Rogers, thank you for being with us today to
describe why this merger is happening and what impact this will
have on consumers.
You both have indicated that this merger is in part a
technology play intended to provide two Main Street banks with
resources to do what they have always done in an era where
technology has made the financial services sector much more
competitive.
Mr. Rogers--no, let me start with Mr. King.
BB&T has a significant and important presence in Kentucky.
Tom Eller, your Kentucky regional president, is a good guy. I
have met him and I know you have confidence in him. And Laura
Boison does a great job in the Lexington market region, which I
represent.
SunTrust, Mr. Rogers, does not have a presence in Kentucky.
What does this merger mean for Kentucky and how will Truist
serve BB&T customers in Kentucky? And I will direct that
question to Mr. King.
Mr. King. Thank you, Representative. We went into Kentucky,
as you know, many years ago through multiple mergers, and we
have expanded since that time.
We love Kentucky. It is a fantastic State. The people there
are great, hardworking, honorable people. We as a company love,
frankly, all of the rural areas in our country.
Mr. Barr. Could I just interrupt there and go back to the
technology piece of this.
How will this merger help a rural State like Kentucky with
those traditional Main Street values that both of your
institutions represent in terms of providing credit to rural
small businesses and farms? And what does technology add to
that?
Mr. King. Representative, this is something that we are
really spending a lot of time focusing on right now, because we
want to find better ways to meet the needs of these rural
communities.
The only way our companies will be successful is if our
clients and our communities are successful and grow. So, we
share that concern with you.
One of the ways, for example, is to provide more digital
capabilities to these areas. The people in these areas need and
want digital capabilities, but in many cases, for example, they
just don't have the broadband capacity.
So, one of the things we are considering as a strategy is
how can we get in and be supportive with the local communities
in providing more broadband capacity.
Mr. Barr. I look forward to working with Truist on that.
And I appreciate the answer.
Mr. Rogers, we have heard about how increased regulatory
compliance costs have created incentives to consolidate.
Please describe, with a little bit more specificity than
you have already, how the newly formed institution will be
better able to manage those regulatory costs?
Mr. Rogers. Thank you, Representative.
As we said in our opening statements, compliance will be a
cornerstone of what we do at Truist. So what this affords us to
do is use things like machine learning, use things like
artificial intelligence, use techniques and technology that
will give us the opportunity to do our job of compliance even
better and to make sure that consumers are protected and to
make sure that we are complying with the rules and regulations
that apply to our business.
Mr. Barr. Mr. King, the Basel Committee on Banking
Supervision has published a methodology for defining a global
systematically important bank (G-SIB). As you know, that relies
on five basic indicators: size; intraconnectedness; the lack of
readily available substitutes or financial institution
infrastructure; and their global cross-jurisdictional activity
and their complexity.
How is the newly formed bank different from a G-SIB?
Mr. King. Representative, we are much, much, much less
complex and risky than those organizations. On that scoring
matrix that you described, which is actually very good and is
promulgated by the Federal Reserve, each company scores about
15 or 16, and the largest institutions score well over 400.
Mr. Barr. You will obviously not be within the definition
of a G-SIB even after this merger; is that correct?
Mr. King. That is correct, sir.
Mr. Barr. And a final question to Mr. Rogers. In your
testimony, you said bigger does not necessarily mean riskier.
And you made the argument that the merger would actually
increase competition by creating a stronger regional bank that
reduces concentration of systemic risk at the top of the
market.
Can you elaborate on how this merger will pose greater
competition to those G-SIBs, especially if you will remain
different?
Mr. Rogers. I think it will enable us to compete with them
in the areas that we are the same in the communities that serve
and compete with them on the investments in technology and the
ability to serve consumers.
Mr. Barr. Thank you. I yield back.
Mr. Lawson. Thank you.
The Chair now recognizes the gentlewoman from North
Carolina, Ms. Adams.
Ms. Adams. Thank you very much, Mr. Chairman. And thank you
for convening the hearing today.
And thank you, Mr. King and Mr. Rogers, for joining us.
Mr. King and Mr. Rogers, thank you for your recognition and
your kind words about the Historically Black Colleges and
Universities (HBCU) partnership challenge. And of course, we
have had a number of conversations with both you and members of
your respective teams, and I am glad that Truist intends to
follow its predecessors, BB&T and SunTrust--SunTrust is my bank
right now--in taking the partnership challenge and making a
public commitment to increase engagements with and investments
in Historically Black Colleges and Universities.
The public pledge aspect of the challenge, though, is only
part of the battle.
What would Truist's strategy for HBCU investment and
engagement be? And could you just focus on your long-term and
sustainable strategies rather than a one-off program?
Mr. King, you can respond to that.
Mr. King. Thank you, Representative, and thank you for your
leadership in this challenge, which we believe is very helpful
for everyone involved.
We believe by working with the HBCUs and by strengthening
their leadership capabilities, working with their students and
their overall campuses, and in terms of investments, just like
we did recently in North Carolina in terms of providing sports
facilities, we think we can make the entire experience at these
colleges and universities more effective.
Beyond that, we want to work very closely with these
universities in providing jobs for their students. The best
thing we can do is to provide curriculum support and guidance
so that when these young folks come out, we can help provide
them really good jobs, so they can go on to meet their goals in
life.
Ms. Adams. So this will not be a one-time strategy; this
will be ongoing?
Mr. King. This will be ongoing, Representative.
Ms. Adams. Okay. Mr. Rogers, did you want to make a quick
comment?
Mr. Rogers. Absolutely. The HBCUs are critical and
important parts of the communities that we serve. One of the
things that we do today is create a financial wellness, to help
students not only graduate, but graduate with some lessons in
financial wellness to be better able to manage their budgets
and be better able to manage their own financial confidence.
So, that is one of the ongoing things we do.
And then, Mr. King has volunteered to sponsor something at
the Leadership Institute of BB&T, which I think will be quite
effective for the leaders of HBCUs.
Ms. Adams. Okay. Let me ask you both some yes-or-no
questions.
If and when Truist begins its operations, will there be an
HBCU graduate in your C-suite? Yes or no?
Mr. King. Representative, we do have a person of color in
our C-suite, and he has great involvement with HBCUs and has
for a number of years.
Ms. Adams. So he will be in the C-suite? That is a yes?
Mr. King. Yes.
Ms. Adams. Okay. Mr. Rogers?
Mr. Rogers. Mr. King spoke for us.
Ms. Adams. Okay. Great. Are there HBCU graduates right now
in your organizations who are on track to become members of the
C-suite?
Mr. King. Representative, I would say absolutely yes.
Ms. Adams. Okay.
Mr. King. Now we need to do more, to be fair, in terms of
providing training and support, and we are now working on some
programs to provide more support. For example--
Ms. Adams. Okay. Good enough.
Let me just move on and ask about the collection of data.
Do you collect the demographic data on prospective new
hires and your overall workforce? Are you doing that or will
you be doing that?
Mr. King. Representative, we do and we will.
Ms. Adams. Okay.
Once merged as Truist--and I am still trying to get used to
that name, by the way--will you commit to including in your
data collection whether a hire is--a long-term employee is an
HBCU graduate? Will you have that information? Will you know
it? Are you going to seek it?
Mr. King. Representative, I am not sure if we include that
now. But that is a great idea, and I will commit to you that we
will do that.
Ms. Adams. Okay. Let me ask you one other thing. Because we
have some real issues in Charlotte, where you are going to be
based--I am still concerned about what your merger will mean to
our communities there.
So, can I get a commitment that you and Truist will
dedicate efforts and resources to securing affordable housing
for long-term residents? We have a serious problem with
housing. And if we can get a commitment past 2022?
Mr. King. Representative, as you know, I have lived in
Charlotte twice and now will be moving there again soon.
And we recently made substantial commitments, each one of
our organizations, to affordable housing in Charlotte.
And I would expect--
Mr. Lawson. The gentlelady's time has expired.
Ms. Adams. Thank you, Mr. Chairman. I yield back.
Thank you very much, gentlemen.
Mr. Lawson. I now recognize the gentleman, the great
athlete from Texas, Mr. Williams.
Mr. Williams. Thank you, Mr. Chairman. I appreciate that
introduction.
First, in full disclosure, as you probably know, I am a car
dealer from Texas. Second, I also played for the Atlanta Braves
organization. So I do need to know, along with Congressman
Scott, what the name of that stadium is going to be. And third,
I am grateful for the banking system.
That being said, contrary to what some of my colleagues
seem to be implying, your two banks are currently being
carefully examined by multiple Federal agencies. The Federal
Reserve and the FDIC are making sure that this new entity will
be safe and sound from a regulatory standpoint.
The Department of Justice is doing an analysis to ensure
that there will still be adequate competition and a healthy
financial marketplace for consumers.
And as both of you have said, you have held the last two
statutorily required public hearings to ensure the communities
that you will be serving are aware of this potential change.
So if my colleagues have complaints about the process of
two banks merging, then I would encourage them to change the
underlying law rather than publicly criticize your two banks
who have been doing everything by the book.
On a side note, I just want to say this about minimum wage:
Minimum wage is not a career, and we need to remember that.
Before we get started here, I want to ask each of you a
question, starting with you, Mr. Rogers: Are you a socialist or
a capitalist?
Mr. Rogers. Representative, I am a capitalist.
Mr. Williams. Thank you.
Mr. King, are you a socialist or a capitalist?
Mr. King. I am a capitalist.
Mr. Williams. Thank you for that answer.
Now, we have heard all of this concern about creating a new
megabank if this pending merger is completed. But if I look at
the business models of your two banks, compared to some of the
G-SIBs in the country, they seem to be quite different, and we
talked about that today. I don't see either of your banks
heavily engaged in some of the riskier derivative plays of the
bigger Wall Street banks, and you have talked about that.
My question to you, Mr. Rogers is, what do you want the
identity of this new bank to be?
Mr. Rogers. Representative, thank you for that question. We
want the identity of that bank to be very similar to the great
histories and identities of our existing banks, to be a great
Main Street bank which can be a full-service bank.
As I said in my opening statement, I started with in an
entry-level position and spent 39 years at the same company,
and that company was always built on, if you build your
community, you build your bank. We are only going to be as
successful as our communities are successful.
We want to make sure that our bank is represented as
someone who is a steward and a partner with the communities
that we serve.
Mr. Williams. Okay. And to add to that, once you get to
that position, are you looking to compete directly with the
biggest, most complex financial institutions in the world in
the future?
Mr. Rogers. Representative, we are only looking to compete
in the markets where we compete. We are not looking to follow
them internationally. We are not looking to follow them into
esoteric products.
But the places where we do compete, the places where we
compete on Main Street, we want to be extraordinarily
competitive with them.
Mr. Williams. Okay. On July 10th, the North Carolina
banking commissioner approved the merger of your two banks.
Their office released a statement that 95 percent of the
comments they received during the review process were positive.
And I look at that and I think, if any of us members on
this committee had a 95 percent satisfactory rate in our
districts, we wouldn't have much to worry about.
So, Mr. Rogers, how do you plan on building upon that
success and continuing to work with customers to avoid
confusion in the areas where branches may be consolidated, as
we talked a little bit about today?
Mr. Rogers. Even with the 95 percent positive, we want 100
percent. So of the 5 percent, we have reached out to all of
them, individually and collectively, to try to address their
concerns, to make sure that we are responding to every need
from everyone in our communities.
Our focus will be on communities. Our focus will not be to
abandon communities. We have committed to keep branches in
rural markets. We have committed to open branches in LMI
markets, because we will only be as strong as our communities.
Mr. Williams. Okay. Mr. King, on page 2 of your testimony,
you pledge to invest around $100 million annually into
innovation and technology, to create a digital client
experience that is second to none.
Can you briefly elaborate on some of these planned
investments and the benefits that they could have for small
businesses like mine back in Texas looking to secure loans?
Mr. King. Representative, there are a number of areas,
starting with enhancing our cybersecurity risk mitigation
programs, which are already good, but need to be increasing
every day because the risk is increasing every day. We want to
keep you and us safe.
We want to provide you with the best level of client
service quality every day so that when you are dealing with
your clients trying to sell cars, we can be there as your
partner, we can provide you real-time immediate support so that
we are not the problem in terms of you being able to sell that
next car.
In order to do that, we are already working on a plan to
provide more all-in or total, if you will--
Mr. Lawson. The gentleman's time has expired.
Mr. Williams. I appreciate you being here. Thank you.
I yield back.
Mr. Lawson. Thank you.
The gentleman from Illinois, Mr. Garcia, is recognized for
5 minutes.
Mr. Garcia of Illinois. Thank you, Mr. Chairman.
I would like to thank the two witnesses here today. I would
like to dive a little deeper on the significance of this
proposed merger and future implications.
The Federal Reserve approved 95 percent of bank merger
applications last year, its highest approval rate since it
began keeping track in 2011.
While a small number of applications have been withdrawn,
the Federal Reserve has not rejected a bank merger application
since 2003. It has been suggested that one reason for this high
approval rating is the Fed's use of a preapproval process
wherein the Fed works out issues with banks in advance of a
merger announcement.
In an American Banker op-ed published in April, a former
Fed attorney wrote, ``It was common for a bank or its law firm
to have private conversations with Fed representatives to
informally vet a proposal before signing a merger agreement. If
Fed representatives raised concerns about a proposal, the bank
might not pursue the deal. But when Fed representatives
expressed no reservations, the bank could enter a merger
agreement with the Fed's implicit blessing.''
Mr. King, did you or anyone on your staff meet with
regulators before signing the merger agreement or filing the
merger application?
Mr. King. Thank you, Representative.
I did have conversations, phone conversations, with
regulators as we are required to, because when we are doing
anything that is strategic and significant in our company,
whether it is related to mergers or not, we are required to
consult with our regulators.
Mr. Garcia of Illinois. So you did.
Mr. Rogers?
Mr. Rogers. Representative, we informed the Federal Reserve
that we were undertaking a merger.
Mr. Garcia of Illinois. Did you meet with them?
Mr. Rogers. We had a conversation with the Federal Reserve.
We are always meeting with our regulators at any particular
time.
Mr. Garcia of Illinois. So you did.
Mr. Rogers. But we informed them we were entertaining a
merger versus seeking an opinion on approval.
Mr. Garcia of Illinois. Thank you. If so, if you did, and
you just answered the question, did you ask for assurances that
the merger would be approved?
Mr. King. Representative, we did not ask for any assurances
that it would be approved, nor did they give us any.
Mr. Garcia of Illinois. Okay. Did the regulators provide
assurances that there would be no barriers to approval?
Mr. King. Representative, we are a little bit limited in
terms of what we can say in terms of conversations that we had
with our regulators.
Mr. Garcia of Illinois. So you can't answer that?
Mr. King. But I can assure you that the process that we are
going through is extraordinarily rigorous.
Mr. Garcia of Illinois. Okay. I get that.
I want to ask about one potential barrier to approval, the
Community Reinvestment Act (CRA).
The Federal Reserve and the FDIC must specifically
consider, ``the record of performance under the Community
Reinvestment Act,'' when reviewing the merger.
In 2008, the FDIC downgraded BB&T's CRA rating from
outstanding to satisfactory due to violations of the
antidiscrimination provisions of the fair lending laws and
regulations.
What assurances have you provided your regulators that
BB&T's record will not spread to SunTrust, and how can we be
sure that the $1.6 billion in operating expense reductions
projected from this merger won't impair Truist's ability to
comply with the CRA?
Mr. King. Thank you, Representative. Our current CRA rating
is outstanding, as it has been for almost my entire career.
That particular situation was a short-term situation where
there was an area we needed to correct with regard to auto
lending, and that has been corrected and is being given very
good ratings from the regulators.
With regard to cost reductions going forward, I can assure
you that we will not be sparing any dollars necessary to
provide the utmost level of Community Reinvestment Act support
and overall support of our communities.
Mr. Garcia of Illinois. Has your most recent rating on
CRA--were there any problems identified?
Mr. King. There were no major problems identified.
Mr. Garcia of Illinois. No major ones. Any minor ones?
Mr. King. Representative, in any examination, there are
always minor ones.
Mr. Garcia of Illinois. Okay. The lenient attitude of
regulators toward mergers has led to a concentration in your
industry. When markets are concentrated, consumers and small
businesses suffer from higher interest rates and less favorable
financing terms.
After S.2155 passed, an analyst for Wells Fargo told CNBC,
``We absolutely expect bank consolidation to accelerate.''
The BB&T and SunTrust merger is the most high-profile and
biggest example of a merger. If this merger were approved, can
we expect it to set a trend in your industry, in other words,
usher in many more?
Mr. King. Representative, the S.2155 change that you are
referring to had absolutely nothing to do with our decision to
merge. It was based on many other--
Mr. Lawson. The gentleman's time has expired.
Mr. Garcia of Illinois. But will this usher in more
mergers--
Mr. Lawson. The gentleman's time has expired.
Mr. Garcia of Illinois. Thank you, Mr. Chairman.
Mr. Lawson. I now recognize the gentleman from Arkansas,
Mr. Hill, for 5 minutes.
Mr. Hill. Thank you, Mr. Lawson. Thanks for sitting in the
chair today. You look good up there.
Mr. King, Mr. Rogers, thanks for coming today. I was in and
out of the discussions today.
You filed your application with the Fed for a merger, is
that correct?
Mr. King. Representative, that is correct.
Mr. Hill. And the State of North Carolina has approved the
merger?
Mr. King. Representative, that is correct.
Mr. Hill. Are there any other States that have to approve
the merger?
Mr. King. There are a couple of other States that have to
opine on the merger, yes, sir.
Mr. Hill. And in response to my friend from Illinois'
question, you both have a satisfactory CRA rating, is that
correct?
Mr. King. Representative, that is correct.
Mr. Hill. The responsibility of the Fed is to evaluate the
impact on all of your communities and do that in a very careful
way. CRA is a big part of that. Have you been given the list of
assets that you have to divest in this merger?
Mr. King. Representative, we are working with all of the
various regulatory bodies. And that process primarily
originates with the Department of Justice. And we are in the
process of having confidential discussions with the Department
of Justice and the other regulators with regard to any types of
divestitures that may be required.
Mr. Hill. Because one thing we talk a lot about in this
committee is the impact on--consolidation industry on the rural
counties. There are 33 counties in the country now that have no
physical bank presence at all, and 2 of those are in Georgia,
in Quitman and Stewart Counties. So, that is always of interest
here.
But we also have 122 counties in the country that have only
one bank office and 163 counties that have two. And this is
something that I have seen over the course of my career where
the Fed is, I think, too narrow in the definition in the
Herfindahl Index in what is competition by using the deposits
only and not taking into account all of the other ways that
people have access to credit and access to deposits.
And they are also too narrow, I think, in this divestiture
they might be considering in a rural county where it can only
be sold to another commercial bank, for example. I really think
if you are in a rural county, you have zero bank locations or
potentially zero, or one or two, that offering opportunity for
other financial institutions to buy those branch locations
would be better.
Do you have any plans to ensure that there aren't
additional counties in Georgia that would go bankless by virtue
of the merger?
Mr. Rogers. Representative, our combined company will
represent more rural counties than any of the largest banks
combined. So we have a fundamental belief and approach to rural
counties.
As you identified, deposits and branches aren't the only
ways to serve rural counties. And we are committed to serving
all of the customers who are in our geographies.
Mr. Hill. Thank you. I hope that the Fed will broaden the
definition of how they look at bank concentration in the
Department of Justice and really get away from the Herfindahl
Index, which I think is outdated.
My friends on the other side of the aisle have talked about
bank concentration and their concerns about that. And, of
course, that is a longstanding, over 200-year concern of all
Americans about concentration of assets in our banking system.
But I would again argue that the fault of that is our Bank
Holding Company Act, that we don't allow more variety of people
to buy banks that get in trouble, and therefore, when you look
at the majority's chart up there and you see failing banks,
they are only allowed to be sold to what? Larger banks. It is
our Federal policy, I think, that drives bank concentration, in
addition to the overregulation that has been talked about
today.
Let me ask each of you, Mr. King and Mr. Rogers, are you
involved in fintech partnerships? Have you gotten an emerging
company that you have partnered with in the fintech world? Mr.
King?
Mr. King. Representative, we do have a partnership and are
considering others.
Mr. Hill. What is the nature of the one that you have now?
Mr. King. It is actually a very interesting company,
Representative, that helps banks and other organizations with
risk management processes, particularly in the AML area.
Mr. Hill. Thank you.
Mr. Rogers?
Mr. Rogers. Representative, we do have partnerships with a
variety of different fintech companies ranging from areas that
are focused on consumers, related to areas that are focused on
technology, all different areas that we think will enhance our
ability to serve consumers in the future.
Mr. Hill. Good. I thank the Chair, and I yield back the
balance of my time.
Mr. Lawson. Thank you.
Now, the Chair recognizes the gentleman from Missouri, Mr.
Cleaver, who is also the Chair of our Subcommittee on National
Security, International Development, and Monetary Policy. You
are recognized for 5 minutes.
Mr. Cleaver. Thank you, Mr. Chairman.
Mr. King, Mr. Rogers, thank you for being here today.
Let me begin by paying a compliment to you. I thought it
was revealing and significant that your two companies did, in
fact, furnish diversity and inclusion data to the regulator. I
have been on this committee for 15 years in January, and this
is the first time I have seen anything like that. So, let me
compliment you. That is rare, and I hope other companies will
take a page out of your book in doing that. So it would at
least suggest that there is great interest in trying to
maintain a workforce that is diverse and looks like and
represents the country.
And I have the numbers that you presented: 20 percent
women, 30 percent people of color. And on the board as well and
27 percent people of color.
One of the problems we have in many of the corporations,
including financial institutions, is that the ranks of the
middle level are, in fact, very diverse. But the problem that,
as time moves on, they don't move up.
And I am wondering, is there something that needs to be
done or maybe even that you guys could do, since you seem to be
a little more advanced than most of these financial
institutions, where a pipeline is developed so that women and
minorities don't stay at that middle level which makes the
diversity numbers look good but they never go up?
Mr. Rogers. Representative, I think you are correct in that
that is one of the challenges that corporate America has about
diversity at the C-suite level.
We took the opportunity, as you recognized, to put
diversity and inclusion in our application, which is not
required, to signify how important it was.
But most importantly, in the thousand or so people that we
have chosen to move into the executive positions in our
company, we realized we were at a seminal moment for Truist,
and exactly what you described as we had an opportunity.
And although we wish we had made more progress, our
collective executive team is 25 percent more diverse than it
would have been if we had just added the two companies
together. So we did want to make sure that we took that
opportunity at this juncture.
Mr. Cleaver. Are you familiar with the NFL Rooney Rule?
Mr. King. Representative, yes.
Mr. Rogers. We are.
Mr. Cleaver. You too as well, Mr. King?
Do you think that works in corporate America?
Mr. King. Representative, I think Mr. Rooney was a
brilliant person, although I have never met him. I think it was
a very good way to provide some discipline for the NFL and it
certainly applies to any other business.
In our business, we applied the Rooney Rule, and we have
expanded it to include women as well so that when we are making
selections at our mid- to higher-level jobs, we imposed an
expanded Rooney Rule to make sure that we are getting diverse
candidates who have a fair chance before the final decision is
made.
Mr. Cleaver. I am going to yield back my time. Because
normally I would--you know, you need to fuss a little bit when
you are sitting up here. You have to fuss just a little,
because it is almost required in Congress.
But I am going to yield back, because I am impressed with
what you are doing.
I yield back, Mr. Chairman.
Mr. Lawson. Thank you.
And now, I recognize the gentleman from North Carolina, the
ranking member, Mr. McHenry, for 5 minutes.
Mr. McHenry. I guess we will leave the rancor down the
hall, and we have a bit of comity here, which is welcome.
This hearing is fairly unprecedented. The last time this
committee had a hearing that was similar to this, it was the
merger of Travelers and Citi. And by the way, both of those
institutions were larger than your merged institution, and that
was 20 years ago, so not even adjusted for inflation. So, we
are in a significantly different place.
I just want to ask you, FDIC Chair McWilliams indicated
that the entire FDIC Board would vote on your merger. Is that
your understanding?
Mr. King. Representative, it is.
Mr. Rogers. Representative, that is what I understood as
well.
Mr. McHenry. It seems to be a fairly proactive step. Her
predecessor delegated that authority and didn't require a Board
vote.
Is that your understanding as well?
Mr. King. Representative, that has happened before.
Mr. McHenry. Okay. But you chose the FDIC as your regulator
to merge this institution for the review. Why? Why did you
choose the FDIC?
Mr. King. Representative, BB&T is the acquiring company,
and the FDIC has been our primary regulator for as long as I
have been with the company.
First of all, it is not appropriate to be trying to change
regulators in the midst of significant combination.
And second, we have had very good regulatory scrutiny and
oversight from the FDIC. And our boards combined believe that
it would be an appropriate form of regulation for our company,
and frankly I believe that is what the regulators would prefer.
Mr. McHenry. In that process, how many pages of information
have you filed?
Mr. King. I'm sorry. Could you say that again?
Mr. McHenry. How many pages of information have you filed
with the FDIC?
Mr. King. I would be happy to get with your staff,
Representative, to give you that number, but it would be well
into the thousands.
Mr. McHenry. Okay. Have you had public meetings?
Mr. King. Representative, we had the 2 public meetings that
were held by the Federal Reserve and the FDIC, plus we had 6
listening sessions voluntarily where we had people come in from
12 States and made presentations.
Mr. McHenry. How many of those listening sessions were
mandated under rules or regulations?
Mr. King. None were mandated.
Mr. McHenry. Okay. And you have had a lot of conversations
and tried to have a transparent process. A lot has been touched
on in terms of the questions on regulation.
Your merged institutions will have significant cost savings
by merging your regulatory and compliance departments, for
sure, but you also both highlight the need for technology
investment.
According to Pew Research, in 2011, 35 percent of Americans
had a smartphone. Today, it is 81 percent. How does that change
the banking landscape for your institution?
Mr. King. Well, Representative, on both sides--and Mr.
Rogers can speak to this as well--it has changed it
dramatically. For example, in our company today, on any given
day, we have 1.8 million touches with our clients digitally and
about 87,000 in the branches.
Mr. McHenry. Say that again?
Mr. King. 1.8 million touches digitally or online with our
clients each day and 87,000 in the branches.
Mr. McHenry. Okay. So the branch network is not what it
used to be?
Mr. King. That is correct.
Mr. McHenry. Okay. Because your customers are driving that
change. What kind of investment is necessary to compete in that
marketplace and to give your customers what they demand?
Mr. King. Representative, it requires a huge investment,
because we have to have not only the platforms to be able to
interface with those clients, but they have to be changed
almost daily.
And the reason is because consumer preferences are changing
literally as we speak. It is what I call real-time
satisfaction. Clients today demand to have what they want, when
they want it, exactly where they want it. And it is happening
in all industries, not just banking.
Even in the past, when I first started, if you had a good
friendly branch system, you didn't need any kind of technology
for the client.
Today, if you don't have the latest and greatest
technology, you are simply not in the consideration set in
terms of which institution they will pick.
Mr. McHenry. So, regardless of this merger taking place,
your branch network in the next decade looks dramatically
different than it did over the last decade; is that fair to
say?
Mr. King. Representative, I believe that is very fair.
Mr. McHenry. Okay. Thank you. I yield back.
Mr. Lawson. Thank you.
I now recognize myself for 5 minutes.
Mr. King, Mr. Rogers, again, I would like to welcome you to
the committee and I think I have heard a little bit of it in
listening to the testimony but I want to make sure I clearly
understand.
As we look at the global market, what impact would the
merger have on the global economy? Specifically, what benefits
and challenges would this merger have on the global market?
Mr. Rogers. Representative, in fairness, I think this
merger has a lot of impact on local communities. I think that
is where the big impact is. Our operations aren't global or
international by nature. So our impact is on local communities.
Our impact is a Main Street impact.
Mr. Lawson. Okay. And I thought I had heard and one thing I
would like to say to you, Mr. Rogers, about SunTrust is, being
in business over 36 years, I had the opportunity to deal with
SunTrust on many occasions, and that relationship was always
great. You even had the mortgage on my house, but I have always
been really impressed with the way you handle the consumer,
which brings me to this question.
A question was asked by one of my colleagues here about
what is the relationship going to be with the underserved? I
understand--and you commented on it again--that that is one of
the relationships that you all, both you and Mr. King, have
observed and talked about as this merger comes together.
Could you elaborate, Mr. King, on that again, about how
does a larger institution go about looking and being in the
capacity to give a smaller loan to individuals? Because one of
the things that we thought that this would be a situation that
exists with credit unions, but oftentimes a lot of the people,
even though they have expanded, still walk into those
institutions because they feel close to them, because they are
all over their communities.
So, could you elaborate on how will the institution, once
the merger continues, and the relationship to deal with the
underserved?
Mr. King. Representative, that is a very important area
because so many of our families and individuals in this country
today have very limited resources, and being able to transact
business in small amounts is the only way they can live, so we
need to have products and services that make it not only
available but easy for them.
So, we are doing a lot of thinking, a lot of planning, and,
frankly, having discussions with regulators with regard to how
we can provide better services, and it is a complex process. It
is not as simple as you might expect to be able to say, we will
just do it, because there are rules and regulations in terms of
what types of loans and deposits and other services that we can
offer, that we have to comply with every day.
But the spirit of it is important, and that is that we want
to try. We want to try to open up the banking system to more
people who are underserved and who deserve banking services. We
believe simply that more individuals and families in this
country can be better served by having access to the banking
system.
Mr. Lawson. Thank you.
Mr. Rogers, one of the questions that was asked about
during the downturn in the economy was on what institutions
were doing, and you all stated that you were doing everything
you could to save homes.
There was a situation some years ago when people were
having problems with the notes on their cars and I was able to
contact your institution and asked them if they could work with
these individuals? Could those individuals pay interest only
until they get back on their feet? And SunTrust was able to
grant that. Do you still run into situations like that?
Mr. Rogers. Representative, there are always situations in
the communities that we serve where people have challenges and
problems and need some kind of assistance and some kind of
help; and we want to have products, services, and capabilities
to accommodate their needs.
Mr. Lawson. Okay.
I think that was my last question.
I am going to move on and recognize Mr. Loudermilk from
Georgia for 5 minutes.
Mr. Loudermilk. Thank you, Mr. Chairman.
And I thank you both for being here. We have had a good
opportunity to have dialogue since this announcement was made
back in February, and I appreciate the transparency that we
have had through both sides of the merger. Quite frankly, it
took some of us by surprise. As you both know, we have gone to
bat a lot for small banks, community banks, and regional banks;
and our first concern and my major concern was what is the
impact this is going to have on Georgia?
Being the sole Republican from Georgia on this committee, I
feel I represent the entirety of the State in financial
services. I have a good working relationship with my good
friend also from Georgia, Mr. Scott; and as he said, my first
concern was over the banking community and the service to the
constituents and consumers of Georgia.
As you know, as Mr. Rogers can attest, the banking
community in Georgia is a very tight-knit community, with a lot
of good working relationships between the locally owned
community banks and the larger banks and even some recent
aspects have brought credit unions into the fold of a good
working relationship.
One of the things that I do is not only get the pulse of
what is happening here but also back in the community, and we
have had several prominent Democrats also come out and support
the idea of this merger as being something good for the State
of Georgia.
And so, it was a little bit different than what we are
hearing here today; and, in fact, as I am sitting in the
committee, I often not just listen to the testimony from you
but also questions that I am getting from both sides of the
aisle to try to get a sense of the pulse of what is going on
here.
I think it is interesting that there has been a lot of
criticism of big business coming from some of the folks here
today and throughout this Congress, some criticisms of what
they call megabanks; but they don't seem to mind mega-
government, and big government is really what the source of the
problem is. It even goes back to the founding of this nation.
Thomas Jefferson wrote in the Declaration of Independence that
one of their biggest concerns was the growth of government that
has erected a multitude of new offices and sent swarms of
officers to harass the people and eat at our substance. It is
the government that is the major drain on the American economy
and individuals.
I also had heard that there is concern over what you would
do to local community banks and credit unions, and that was one
of the concerns I had early on. I talked to a lot of our local
community banks, and ever once did they mention the merger of
these two banks as a concern. Their number one concern is the
400 regulations and 2,800 restrictions brought on by Dodd-
Frank. That has done more damage to the banking community in
Georgia.
So, I just want to lay that out there that the sense in
Georgia is this is going to be a positive move. Even though
there is a loss of a regional bank headquartered there, we
think we are growing.
I do have some questions, though. I understand that banking
operations would continue to be based--some of it would be
based in Georgia. However, there are about 740 SunTrusts and
BB&T bank branches within 2 miles of each other. So, my concern
is the--other concerns are the possible branch closures and job
losses.
Mr. Rogers, I know that you are prohibited from making
decisions on branch consolidation until after the merger is
approved but can you kind of comment on how Georgia consumer
employees will fare after all this is settled?
Mr. Rogers. Representative, thank you.
As you noted, I have been a proud member of the Georgia
banking group for a long time. And Georgia will continue to be
important to Truist.
I think the question was about--
Mr. Loudermilk. You have several branches of both banks
that are close to each other.
Mr. Rogers. Yes.
Mr. Loudermilk. I know you cannot go into details. But can
you comment on what the outcome is going to be?
Mr. Rogers. Yes. Thank you.
Mr. Loudermilk. The intention.
Mr. Rogers. The outcome, the intention--as you noted, we
can't disclose because we haven't been able to do the work yet
on which branches in specific would be subject to decisioning,
but what we have said is that all client-facing teammates--and
those are teammates and employees who exist in branches--will
have employment. So, the job loss in those branches we expect
to be de minimus because we will offer them other opportunities
in our company in other places.
As I mentioned, we have natural turnover in that business.
So, we can say with a great deal of confidence that those
employees will be offered opportunities. So in the State of
Georgia, if someone was in a branch and that branch got
consolidated, they would have an opportunity with the new
company.
Mr. Loudermilk. All right. Thank you.
I am running out of time. I have some other questions that
I will submit for the record.
But I also want to comment on one of the big concerns I
heard, which is what is going to happen to the name of the
park, especially since we probably will host a World Series
this year, and I appreciate my colleague on the other side
strongly advocating for a Loudermilk-Scott name possibly for
it.
With that, I yield back.
Mr. Lawson. Thank you.
The Chair now recognizes the gentlewoman from Michigan, Ms.
Tlaib.
Ms. Tlaib. Thank you so much, Mr. Chairman.
Thank you both for being here. I want to talk about mega-
discrimination. Folks are using these various words but it is
really people at home in my district who are directly impacted
by some of the practices by banks, small and large, but it is
the human impact. We lost more Black home ownership in Michigan
than any other State.
We have seen more of kinds of practices that are happening
on the ground that are preventing the majority of folks in my
district who are lower-income, moderate-income families who
have decent-paying jobs but for the fact that we have various
systems in place, I think, that lack accountability.
And so both of you know, I have the lawsuits here and some
of the settlement agreements in regard to some of the
practices.
From 2005 to 2009, Mr. Rogers, SunTrust Mortgage violated
both the Fair Housing Act and the Equal Credit Opportunity Act
by charging more than 20,000 African-American and Latino
borrowers higher fees and interest rates than non-Latino and
white borrowers, resulting in thousands of families, Brown and
Black families, paying more for their loans.
Could you describe SunTrust's effort to repair, to address
the scheme of the discriminatory practices within the lending
process right now? Because then I want to ask you about the
merger.
Mr. Rogers. Representative thank you. No consumer,
regardless of race or gender, should ever be discriminated
against.
Ms. Tlaib. I agree.
Mr. Rogers. And so, we agree on that.
In that specific case, we didn't have agreement on whether
we discriminate or not but we did have agreement that our
policies could be better, so we have put forth policies at
SunTrust that check on a weekly, daily, and monthly basis to
ensure that we don't have policies and practices in place that
discriminate against anyone. We look at our compensation
practices and those are monitored very effectively at our
company, and our low- to moderate-income lending has increased
substantially since then.
Ms. Tlaib. Yes, and there was a $21 million settlement. I
think folks need to know that. That sounds like something was
wrong.
Can you describe the current state of SunTrust Mortgage's
monitoring efforts for discriminatory lending and if these
restrictions on loan offices and mortgage brokers have been
reduced?
Mr. Rogers. They have been. We have a monthly process where
we look at virtually every loan that we have made to ensure
that we don't have a discriminatory practice from a pricing
standpoint. We have eliminated any of that in our compensation
practices and we continuously monitor for that to ensure that
we don't have any defects along with that process, because this
is critically important to us. That was a chapter that we are
not proud of in our company and one that we do not intend to
repeat.
Ms. Tlaib. Finally, what assurances can you provide the
public and for us in this committee that the merger, the merged
bank, will not engage in the same discriminatory lending as its
predecessor? Do the settlement requirements go along with the
merger, or do you all get to wipe that clean and start all over
again?
Mr. Rogers. Representative, we will never wipe
discrimination clean.
Ms. Tlaib. I am glad you answered it that way.
Mr. Rogers. The policies that we have in place will be key
going forward.
Ms. Tlaib. Mr. King, will the merged bank participate, if
it is in approved, in the Federal Housing Authority's
Endorsement Program?
Mr. King. What's that program again? I'm sorry.
Ms. Tlaib. If the merger is approved, the bank, both of
your banks merging--I think you call it Truist--will you be
participating in the Federal Housing Authority Endorsement
Lender Program?
Mr. King. Representative, we will.
Ms. Tlaib. And does the merged bank plan on adhering to the
False Claims Act?
Mr. King. Absolutely.
Ms. Tlaib. Between January 1, 2016, and September 30, 2014,
your bank, Mr. King, endorsed FHA insurance for mortgage loans
that did not meet the HUD underwriting requirements and did not
adhere to FHA's quality control requirements--to continue to
have loans backed by FHA, your bank lied to continue to
participate in FHA's Direct Endorsement Program.
So, Mr. King, could you describe how your bank has
addressed this issue and the effectiveness of the changes
implemented?
Mr. King. Thank you, Representative.
We did, like most institutions, have challenges with regard
to our processes to meet the utmost standards.
Ms. Tlaib. I know, Mr. King, but calling it challenges and
not lies does not mean you are going to address the problem and
I know I don't have enough time. We can talk offline but--
Mr. Lawson. The gentlelady's time has expired.
Ms. Tlaib. --please don't call it challenges. It was lies.
You misled them.
Mr. Lawson. The time has expired.
The Chair now recognizes the gentleman from North Carolina,
Mr. Budd.
Mr. Budd. I thank the Chair.
As a Winston-Salem native, I know that BB&T's contributions
to our local economy and charitable causes have helped a lot in
a lot of parts of our State. So, the name means a lot to our
community; and I am happy to have you here, Mr. King, along
with you, Mr. Rogers.
Look, we all know that this is a political hearing. Both of
your banks are strong. Both of your banks are following a
detailed merger process. And the North Carolina Commissioner of
Banks, Ray Grace, approved this about 2 weeks ago, on July
10th.
That being said, I have a couple of questions. I want to
start with you, Mr. King. Can you tell this committee more
about your experience back, this is maybe a decade or two ago,
when you were in Wilson, North Carolina? You moved to Winston-
Salem, so a bigger community, leaving a smaller community. And
how did Wilson fare after you moved to Winston-Salem?
Mr. King. Thank you, Representative.
I think that is a very insightful and fair question because
that was a merger of equals as well.
Our company, BB&T, merged in a merger of equals with
Southern National Company and as a part of the transaction, we
did move our headquarters out of Wilson, a town of about 30,000
people. There was great concern at that time in the community
that the loss of jobs would be catastrophic.
We told the community at that time that we were merging to
go forward to grow and prosper and that we thought that it
would be good for the community and, in fact, at the time we
did the merger in 1995, we had about 1,000 employees in Wilson,
and today, we have over 2,000 employees there. The community
has continued to thrive. We are, in fact, building a brand new
state-of-the-art headquarters there today as we speak.
And so, it has turned out to be very good for Wilson. It
has turned out to be good for Winston-Salem, just as I believe
the Truist combination will be good for Atlanta, good for
Winston-Salem, and good for Charlotte.
Mr. Budd. Thank you.
So, following up--and this is a bit the inverse of my
colleague, Mr. Hill from Arkansas, his questions, which were
about rural communities. My question is, what role do you see
rural communities playing in the future of your business? I
want to see how you are engaged there. And how does Truist plan
to stay involved in small-town America?
Mr. King. We believe very strongly, Representative, in
supporting rural America. Rural America is at the roots, if you
will, of our great country. We grew up as a farm bank, and for
almost my entire career we have served almost predominantly
rural areas. We will continue to be deeply committed to rural
areas.
We have expressed that through our actions. Over the years,
we have acquired major institutions in West Virginia and in
Kentucky. We have expanded in our old markets in North Carolina
and South Carolina. We are active in southern Georgia. We like,
to be honest, small markets as well, or better, than large
markets. They are all really important.
I can say to you that I firmly believe our commitment to
small, rural America will be no less than it has been in the
past and will almost certainly be greater because we will have
more capacity to make more investments in those communities.
For example, we recently made a $5 million-commitment to
West Virginia to help fight the opioid crisis. Recently, we
committed $5 million in eastern North Carolina to help build
and restore housing that was wiped out by floods. We are
building headquarters, as I mentioned, in Wilson but also in
Whiteville. We are doing things in small communities today that
we simply don't have to do by any regulation or any mandate. We
are doing it because it is the right thing to do.
Mr. Budd. Yes, every time you have mentioned a different
area, I can put faces and names with those stories. So, thank
you so much for what you are doing there.
Mr. Rogers, continuing on, how do you think rural and
smaller communities will fare as technology advances the
business of banking? Things are changing. How can you make sure
that the rural and these smaller communities don't get left
behind when it comes to technology?
Mr. Rogers. I think that will be critical, and that is one
of the key reasons for this merger is to afford the opportunity
to reach out to all of our communities. The rural communities
will be a big part of that. If you think today as sort of what
a tractor looks like and think about all the technology that
exists on that, that is the same with financial services is
those rural communities want the same type of benefits and the
same type of opportunities. They want to deal with financial
services just like they deal with everything else that is part
of their infrastructure.
And I think this is going to afford us the opportunity. I
think we will really be the bank that will be recognized for
physically and digitally and humanly serving rural markets.
Mr. Budd. Very good.
I think my time has nearly expired.
Mr. Chairman, I yield back.
Mr. Lawson. Thank you.
The Chair now recognizes the gentlelady from New York, Ms.
Ocasio-Cortez.
Ms. Ocasio-Cortez. Thank you, Mr. Chairman.
Mr. King and Mr. Rogers, as you understand it, this is the
largest bank merger since the 2008 financial crisis, correct?
Mr. King. Correct.
Mr. Rogers. Representative, I believe that is correct.
Ms. Ocasio-Cortez. Okay. As a part of the settlement with
the government, Mr. King, BB&T admitted that between January 1,
2006, and September 30, 2014, ``it certified for FHA insurance
mortgage loans that did not meet the HUD underwriting
requirements,'' meaning that it sold the public junk mortgages
and as a result of that settlement, your bank paid $83 million
to the public. Is that correct?
Mr. King. Representative, in that experience this was a
conclusion by the FHA that some of our documentation was not up
to their standards.
Ms. Ocasio-Cortez. I see.
Mr. King. And as a result, they denied the guarantee of the
loan between the FHA and BB&T. It had nothing to do with the
client. It was between our company and the FHA.
Ms. Ocasio-Cortez. Thank you.
And, Mr. Rogers, in 2014, the CFPB, the DOJ, HUD, and the
AG in 49 of the 50 States, plus the District of Columbia,
reached an agreement requiring SunTrust to pay $968 million for
engaging in, ``systemic mortgage servicing misconduct.'' Is
that correct?
Mr. Rogers. Representative, that is correct.
Ms. Ocasio-Cortez. Okay. And in a statement released by the
CFPB, SunTrust was found to have engaged in illegal foreclosure
practices, providing false and misleading information to
consumers.
Regardless of intent, these things have happened. They have
been documented as having happened. And we often rely on
watchdogs to make sure that the public is being protected; but
if this merger is approved, the FDIC would be the primary
regulator for you both, is that correct?
Mr. King. Representative, that is correct.
Ms. Ocasio-Cortez. In other words, the FDIC Chair would be
responsible for overseeing the largest bank for which the FDIC
has served as a primary regulator.
Are you aware that only three of the five seats at the FDIC
are filled?
Mr. King. Representative, as I understand it, that is
correct.
Ms. Ocasio-Cortez. So, the FDIC is supposed to be an
impartial watchdog, except the only vacancies on the FDIC are
for Democrats, so currently, the FDIC is only chaired by
Republicans. Correct?
Mr. King. Representative, I believe that is correct. That
is not my specialty.
Ms. Ocasio-Cortez. Of course.
So, right now we are dealing with an all-Republican FDIC
when it is supposed to be impartial which, I think, raises
questions, Mr. Chairman, about the potential politicization of
a merger, which should not be the case.
Are you also aware that the FDIC Chair, the White House
official responsible for filling these vacancies, and SunTrust
head lobbyists were all employed by the Republican Senate
Banking Committee?
Mr. Rogers. Representative, I was aware of that.
Ms. Ocasio-Cortez. Okay. In other words, the primary
regulator who is supposed to provide oversight of the industry,
ask the toughest questions, and scrutinize the merger has
longstanding ties through her former employment to one of the
banks requesting this merger.
I think it is something that should be noted and I think it
raises questions about the process through which it is
happening on the executive level. I understand you are not
responsible for those appointments.
And, lastly, it is also true that this will be the largest
bank, even though it would not be deemed too-big-to-fail
nationally. This will be the largest bank in Georgia, West
Virginia, and Virginia, and the second largest bank in Maryland
and North Carolina. Correct?
Mr. King. I believe that is correct.
Ms. Ocasio-Cortez. Okay. Thank you.
I yield back.
Mr. Lawson. Thank you.
The Chair now recognizes the gentleman from Tennessee, Mr.
Rose, for 5 minutes.
Mr. Rose. Thank you, Mr. Lawson. I appreciate the
opportunity.
And thank you, Mr. King and Mr. Rogers, for being with us
today, although I must say, to some degree, I question why we
have you here. It has long been my belief that free markets
with proper regulatory oversight bring about outcomes that work
efficiently for both consumers and share holders.
Banking, of course, is a highly competitive industry.
Shareholders demand their banks are innovative and serve the
needs of customers because otherwise those customers, quite
simply, will go somewhere else and I am sure you have both
experienced that. At the end of the day, history shows us that
competition is the ultimate consumer protection.
And I share the concerns of some of my colleagues across
the aisle about the politicization, if I say that correctly, of
the regulatory oversight and so I might just say that our
intervention in mergers like this where there is a proper
regulatory framework, I think is, in fact, the source of in
some cases of that politicization, if I can say it.
And I appreciate also the concerns from my colleagues from
Georgia, notwithstanding their maybe outsized claims about the
prospects for their local baseball team, and it struck me that
it was just 30 years ago that SunTrust merged with the old
Third National Bank in Nashville and there were concerns then
about the future of that institution as it related to both
Nashville and the broader Tennessee community. But I think that
experience also proves that those combinations led to efficient
markets, and I think we should trust those markets for the
market-optimizing solutions that we trust free markets to
deliver.
I do have concerns that I wanted to address with the two of
you today about what I fear are lingering effects of Operation
Choke Point, particularly with regard to bank customers that
operate independent ATM machines and networks.
And I wonder if the two of you could address this and let
me know, have either of your banks unbanked independent ATM
operators in the past 18 months, and what visibility can you
give us to your policy going forward with respect to dealing
with those particular customers?
Mr. King. Representative, I do not recall us unbanking
anybody dealing directly as an independent ATM operator nor
would I find that to be an offensive business. We are for
competition. We would say that anyone that operates an
independent ATM operation should follow the rules and
regulations that are promulgated, that apply to all of us so
that our clients will be safe in terms of their privacy of
information and the privacy of their money and security of
their money.
Mr. Rose. Mr. Rogers, do you have anything to add?
Mr. Rogers. Representative, I am not aware of any action we
have taken but I would have to get back to you on that.
Mr. Rose. I would appreciate it if you would get back to me
following the hearing on that.
I note that Operation Choke Point has ostensibly been ended
and is a stain in my opinion on some of our government
regulatory and criminal justice or justice players.
But I wonder if your banks are continuing to receive any
pressure from bank regulators or other governmental authorities
to unbank customers of any description?
Mr. King. Representative, we are not.
Mr. Rogers. Representative, I have not had that experience.
Mr. Rose. And then my concerns about the remnants, if you
will, of Operation Choke Point and related or similar unbanking
efforts or movements driven by perhaps special interest extends
to other legal businesses and industries.
In particular, I might mention a few: gun dealers and
manufacturers; small-dollar lenders; and legal detention center
operators.
Given the scale of the combined institution that Truist
will be, could you tell us a little about if you have any plans
and what your policies might be going forward with whether or
not you might choose to disfavor what are otherwise legal
businesses?
Mr. King. Representative, we cannot speak specifically with
regard to what the Truist policies will be since Truist does
not exist today. We will have a process where management will
make recommendations to our board, and they will approve the
final policies for Truist.
But for BB&T, I can tell you that we try very hard to help
our clients achieve economic success and financial security. We
focus on lawful institutions and then we consider many other
factors, financial and economic, in terms of deciding whether
or not they are a bankable enterprise.
Mr. Rose. And that seems very reasonable.
Mr. Rogers, could you--
Mr. Lawson. The gentleman's time has expired.
Mr. Rose. Thank you.
I yield back.
Mr. Lawson. Thank you.
The Chair now recognizes the gentlelady from Ohio, Mrs.
Beatty, who is also the Chair of our Subcommittee on Diversity
and Inclusion. She is recognized for 5 minutes.
Mrs. Beatty. Thank you, Mr. Chairman.
And thank you, Mr. King and Mr. Rogers, for testifying
today and for also coming in to talk to me about diversity and
inclusion. I am going to take the limited time I have to divide
it into two parts.
My first part is I have been listening carefully and
intensely to my colleagues on both sides of the aisle. So, I am
going to ask you to listen intensely for my first 50 percent of
my comments.
I have heard you both talk about local communities. I have
heard my colleagues on both sides, Mr. Chairman, talk about big
government and not big banks. Maybe it is both. For me it is
about constituents, your consumers. It is about communities,
and it is about collaboration.
So, here is what I want to say to you. When you have bank
mergers--and some of this is through no fault of your own--you
find out about the branches, and I know there are legal things
you can't disclose.
For me, let me tell you how I connect the dots. I have
people who will come in and say they have lost their jobs
because of mergers. I have communities who will say it was the
only bank in my community, like when we take away grocery
stores and create food deserts. I really respect the technology
and online.
But let me just tell you in my district, in many rural
parts of the State of Ohio, people can't get online. There are
elderly people who can who choose not to and that they go--my
father walked into his bank every weekend and banked. He never
thought about getting online. I have young people who get
online. I have Gen X and Gen X who only get online but they,
too, have concerns when you have mergers, because they are
underbanked or they are unbanked, and they can't get their
loans and mortgages.
This week, I have had more people call me about, how do we
close the wealth gap and the lack of affordable homes, and that
ties directly back to getting loans or knowing how to bank.
The other thing right here in this committee, 56 Members,
Democrats and Republicans, voted for a bill that I put out that
the Federal Reserve banks must have people of color sitting
there because it makes a difference when you are in the room.
If there is a female, if there is a person who is Brown or
Black, knowing the experiences that many others haven't had, I
personally believe it makes a difference.
So, when I think about what are the real issues here, it is
about getting educated, getting the communities educated, and
you doing a better job. When you pull it up and you see all
these lawsuits, you see the Black farmers are opposed to this,
because they have not been educated.
For me, it is structural, racial disparities that we need
to work on. So, let me go to the DNI and say you have done a
great job in presenting your case on what you have done.
Here is where you haven't done a great job, and here is
where it ties into the wealth gap. When I look at what I call
business diversity--and we have had this conversation. So,
let's just take for the sake of time when we talk about
utilizing diverse asset managers across your various platforms,
including the 401K, the pension plans, the wealth management;
that is where banks like you have failed. We do not have it. If
we look at the law firms and the accountants, I won't go
through the numbers because they are minuscule.
So, my question to you for us to take away all of the
negatives--and they are out there--and how we deal with
removing the disparities, it starts with a commitment to a
plan. And so I am asking, what are your partnerships with the
Urban League, with the NAACP, with the Hispanic Caucus, with
women's programs, with the farmers' programs, with the
veterans? Those are the kinds of things you have to do to build
platforms. It is not always money. It is access and fair
treatment.
So, I am asking for a commitment from you to go beyond the
technology--technology is wonderful, but it cannot be the
answer to everything.
So, you have 15 seconds apiece to say something.
Mr. King. Thank you, Chairwoman Beatty.
We agree with what you are saying. We want to support
diversity and inclusion in any form and fashion we can. We
recognize there is much work to be done. We recognize that it
is going to take a collaborative effort. There are a lot of
things that need to be focused on, as you know better than
most.
We believe some of the most important areas are housing,
jobs, and education. We talked about, when we met, the issues
in education in this country. We simply have to provide a more
even playing field for education for those that are--
Mr. Lawson. The gentlelady's time has expired.
Mrs. Beatty. Thank you.
I yield back.
Mr. Lawson. Now, the Chair will recognize the gentleman
from Tennessee, Mr. Kustoff.
Mr. Kustoff. Thank you, Mr. Chairman.
I appreciate Mr. King and Mr. Rogers being here this
morning to testify.
If I could for a moment, I would like to comment on the
question from the gentlewoman from New York regarding the
composition of the FDIC. I believe there is one Democrat on the
FDIC Board, Marty Gruenberg, who was the Chair of the FDIC
during the Obama Administration. I believe, as the ranking
member has already noted, Chairman McWilliams has indicated
that the full FDIC Board will vote on this merger.
Mr. Rogers, I represent part of Memphis, Tennessee, and
also the west Tennessee area. You had a predecessor bank in
Memphis, National Bank of Commerce, which you acquired in the
mid-2000s.
And if I could to both of you, we have talked this morning
about branch closures, the evolution of technology, changing
consumer habits. But if your banks merge, can you anticipate
what the geographical footprint of your combined bank would be
3 years down the road and 5 years down the road? In other
words, will you operate in other States that you currently
don't operate in today or can you envision that?
Mr. King?
Mr. King. Representative, I can envision that our footprint
will look substantially like it does today, which is 17 States
primarily in the south and southeast, expanding over to Texas.
I can see us having a very diverse footprint between
metropolitan areas and a lot of rural areas.
As you may know, we are very much and happily invested in
places like eastern Tennessee, western Tennessee, Kentucky,
West Virginia, and eastern North Carolina. We like those
markets. I would expect we would continue to invest in those
markets in the foreseeable future.
Mr. Kustoff. But you do not see any geographic expansion in
terms of other States 3 years down the road if the merger is,
in fact, approved?
Mr. King. Representative, it is changing. The world is
changing really fast. It is hard to see that far, but we have a
lot of work to do to make sure we take care of clients and
communities in our existing footprint.
Mr. Kustoff. Thank you.
As it relates to the evolution of technology--and my
colleague, Mr. Rose, asked you about independent ATMs. What do
you see as your ATM commitment in the regions that you serve?
Will you grow the ATM network? Are people using ATMs these
days? And what do you see, again, 3 years down the road and 5
years down the road?
Mr. Rogers. Representative, I think, like many of the
things that we will be doing, it will be driven by the
consumer. It will be driven by what is able to be done at an
ATM. Today, we have ATMs that take deposits. We have ATMS that
allow you to have a physical interaction with a representative.
So, a lot of it will be dependent on what consumers want
and how we deliver that and whether that can or will be
delivered through an ATM. So it is hard to say 3 years from now
whether we will have more or less ATMs, but I am confident we
will have more capability to serve our clients in the physical
and the digital ways in which they want to be served.
Mr. Kustoff. You have touched on this, both of you have, at
various times this morning. Why the need to merge? What
economic conditions and what regulatory conditions drove you
two to the decision that for the ultimate benefit of both
banks, you need to merge?
Mr. King. Representative, the primary factors are market
driven, economically driven, and financially driven. The world
has changed really, really fast in retail in general, and
particularly in banking, and it is primarily around the use of
technology.
Historically, a relationship is based on quality, and
quality was defined as the touch or the personal interaction.
Over the last 4 or 5 years, that has changed dramatically.
People expect today what I call real-time satisfaction. They
expect to have the technological platform, the technological
capability to be able to do what they want to do, when they
want to do it, where they want to do it.
So, as two separate institutions, we are doing okay, but as
we looked forward, we saw a marketplace that was changing fast,
and the larger institutions were becoming very good in the
technological area. We simply believed, by combining together,
we will be able to meet our clients' and our communities' needs
even better.
Mr. Kustoff. And you could not, existing the way you exist
today as separate entities?
Mr. King. Representative, we do not believe that we can
compete effectively today nearly as well as we can combined.
Mr. Kustoff. Thank you.
I yield back.
Mr. Lawson. Thank you.
The Chair now recognizes the gentleman from Texas, Mr.
Green, who is also the Chair of our Subcommittee on Oversight
and Investigations. You are recognized for 5 minutes.
Mr. Green. Thank you, Mr. Chairman.
I thank the witnesses for appearing as well.
Is it true that last week, BB&T reported record earnings of
$842 million with assets of approximately $226 billion? Is this
true, Mr. King?
Mr. King. Representative, that is true.
Mr. Green. And is it also true that SunTrust has assets of
about $216 billion?
True, Mr. Rogers?
Mr. Rogers. Representative, that is correct.
Mr. Green. And is it true that, while you may not be making
the profits that you desire--I am not sure anyone ever does,
but is it true that you are not going out of business anytime
soon, either of you?
Is that a fair statement?
Mr. King. Representative, I would not expect us to go out
of business anytime soon.
Mr. Green. Mr. Rogers?
Mr. Rogers. Representative, I think that is a fair
statement.
Mr. Green. And is it also true that the two of you, should
you merge, will have some 740 branches within 2 miles of each
other?
Fair statement?
Mr. King. Yes, sir.
Mr. Green. And is it also true that branches within 2 miles
of each other can at some point be deemed as, you are competing
against yourself? Fair statement?
Mr. King. Well, Representative, all of the banks in those
markets, whether they are 2 miles apart or 3 or 4 miles apart,
are competing against each other.
Mr. Green. But you would not want to compete against
yourself, would you?
Mr. King. We would tend not to want to compete against
ourselves.
Mr. Green. Which means that you would likely close some of
these institutions so as to avoid self-competition. Nobody
competes against himself or herself, if possible.
Mr. King. Representative, this is a very complex area, and
if I may, just because a branch is 2 miles apart does not mean
that we would rule it to be not necessary.
Mr. Green. Then, my guess is that you would be amenable to
having it recorded among the merger documents that you will not
close any of these banks that are within 2 miles of each other,
fair statement?
Mr. King. Representative, we have said that we are not
going to close any branches in any States where we both do
business for at least a year. We have said in rural markets or
smaller markets--
Mr. Green. Excuse me for interrupting, but time is of the
essence. Within a year, my belief is that we will probably have
a lifespan that will exceed a year. People who are working will
want to keep their jobs beyond one year. So, what you are
saying is that you may close after a year some of these banks
that are within a couple of miles of each other, fair
statement?
Mr. King. Representative, that is a fair statement. We have
also said that our client-facing performing associates will not
lose their jobs.
Mr. Green. Okay. If they will not lose their jobs, does
that mean then that you won't have any layoffs at all?
Mr. King. Representative, I did not say that, sir. We have
said to our client-facing performing associates that they will
not lose their jobs. There may be other opportunities
throughout the entire enterprise where associates may be
offered different jobs or opportunities.
Mr. Green. Well, let's accept what you've said. Let's
accept it. I will note that in 2004 when Bank of America merged
with FleetBoston, they cut 12,500 jobs, approximately 7 percent
of the workforce; and a few banks will advertise that we will
be cutting some significant portion of our workforce at the
genesis of a merger.
But let's put that aside, and let's accept what you have
said as the gospel. My grandfather was a preacher. So, forgive
me. But let's accept it as the gospel that there will be no
jobs lost. Are you amenable to having it made a part of your
merger documents that, in fact, make it conditioned upon no
jobs being lost?
Mr. King. Representative, there are economic factors in
this--
Mr. Green. See, that wasn't what you said just a minute ago
now. You said no jobs would be lost, and I am accepting that as
the gospel. So let's put that gospel into the Bible. The Bible
will be the merger documentation. Can we do this?
Mr. King. Representative, I am a Baptist. So, I like to
tell the truth.
Mr. Green. Well, good for you.
Mr. King. I did not say what you said. I said no client-
facing performing associates would lose their jobs.
Mr. Green. Oh, well, then I am a Baptist as well, and I
like to be corrected. Having been corrected, you are saying
that some people will lose their jobs then?
Mr. King. Representative, it is likely that some people
will lose their jobs.
Mr. Green. So, now let's go back.
Mr. Chairman, I ask unanimous consent that I have an
additional 2 minutes, without objection.
Thank you, Mr. Chairman.
Now, we do have people losing their jobs. Let's talk about
what we will do for the people who will lose their jobs as we
acknowledge that there will be job losses; and I am not going
to try to nail you down to the numbers, so you can relax, okay?
But we do know that people will lose their jobs.
Are you amenable to doing more than 2-week's severance,
which is not a golden parachute? That is what the two of you
would get when you exit, golden parachutes, and I am not
opposed to golden parachutes, but those are lead parachutes for
the people who work at the lower levels in these banks.
So, will you guarantee more than a few weeks of severance
and more than simply counseling people? That is good. Some
people will probably need additional training. Some people will
probably need some additional support beyond the usual
severance package. So now you are about to merge, and you have
indicated that there will be job losses. You are doing quite
well. You are making $842 million in earnings, which is a
record for you. You are going to do well.
I am not saying to you that you have to guarantee people a
job for life, but you both have said that there is a good
likelihood that you won't go out of business anytime in the
near future. So, if you just stay apart, the people who are
working will probably be able to keep their jobs, minus bad
behavior, lack of competency, or other things, but they will be
able to keep their jobs.
So, if we are going to see this merger take place with two
companies that are doing quite well, why not in your merger
documents indicate that you will do more than severance and
counseling? Would you be amenable to having that in the merger
documents?
Mr. King. Well, Representative, first, neither one of us is
getting a golden parachute with regard to this merger.
Second, we will do everything we can for our associates. I
have been involved in almost 100 mergers--
Mr. Green. Excuse me. Then you can indicate in your merger
documents that you will provide more than counseling and
severance. Will you do this?
Mr. King. We will do everything we can possibly do--
Mr. Green. Okay. I am going to recommend that that be in
the merger documents.
I thank you very much. A good Baptist. I love you. I yield
back.
Mr. Lawson. Okay. Without objection, the gentleman from
North Carolina is recognized for 2 minutes.
Mr. Budd. Thank you, Mr. Chairman.
So, we are talking about job loss, and job creation here.
Mr. King, you mentioned, when we were talking about the 1995
merger with Southern National, leaving a small town which, of
course, was going to be fearful for their jobs but you said it
had 1,000 jobs then and it now has 2,000 jobs.
What were some of those jobs that were created?
Mr. King. We made Wilson our technology center, and over
the course of these years we have created a huge number of
technology jobs and support jobs that support those technology
jobs. There have been marketing jobs that have been created and
a number of other types of administrative jobs. It is primarily
support jobs that are very stable jobs.
Mr. Budd. So these jobs are minimum wage? I wouldn't think
they would be.
Mr. King. Representative, these would be relatively much
higher paying jobs.
Mr. Budd. One of you mentioned earlier talking about
branches having, just the nature of the branches, they have
some higher turnover; and we are talking about branches within
2 miles of each other, sort of a concern there if you happen to
close one of those one day. You talked about there not being
expected layoffs because you could give them opportunities
either in another branch or maybe even somewhere else in
Truist, the combined bank.
Talk a little bit about that.
Mr. King. Representative, that is exactly what happens. I
have been through many mergers, as I indicated, and what we do
with the branches is to provide that people don't lose their
jobs, as I indicated. We promise them jobs. Even if we
consolidate branches, we pull the employees together because we
still have the business. Then sometimes they relocate, but they
have jobs.
In the back room we work very hard to offer, first of all,
our associates opportunities to retrain and take other jobs,
relocate to markets where there are openings for their existing
job; and then in the final analysis, if we try really hard and
can't find a job, we have a very robust outplacement service
and relocation service for them.
Mr. Budd. Thank you.
My time has expired.
Mr. Lawson. Okay. I would like to thank the witnesses for
their testimony today, and I see the chairwoman just walked in.
I did want to see if she had any comments before we adjourn.
Thank you.
The Chair notes that some Members may have additional
questions for this panel, which they may wish to submit in
writing. Without objection, the hearing record will remain open
for 5 legislative days for Members to submit written questions
to these witnesses and to place their responses in the record.
Also, without objection, Members will have 5 legislative days
to submit extraneous materials to the Chair for inclusion in
the record.
This hearing is now adjourned.
[Whereupon, at 12:57 p.m., the hearing was adjourned.]
A P P E N D I X
July 24, 2019
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
[all]