Fed approves Bank of America's merger with FleetBoston, creating third-largest U.S. bank

Tuesday, March 9th 2004, 12:00 am

By: News On 6

WASHINGTON (AP) _ The Federal Reserve has cleared the way for Bank of America and FleetBoston Financial Corp. to combine and form a banking titan with nearly $1 trillion in assets, stretching from California through the South and up to New England. It will be the nation's third-largest bank.

The Fed's board of governors, including Chairman Alan Greenspan, voted 6-0 Monday to approve the merger, finding that Bank of America's acquisition of New England's largest bank would not threaten competition or unduly concentrate banking resources.

The new institution, with about 5,700 branches, would have assets estimated at $966 billion, trailing only Citigroup and another planned bank megamerger between Chicago-based Bank One and Wall Street powerhouse J.P. Morgan Chase.

The proposed purchase of FleetBoston _ a deal estimated at $47 billion when announced last October _ has been met with much anxiety in Boston, which would lose its last major hometown bank, and to a lesser extent in other communities across the country worried about diminished competition and local control.

The central bank's approval removed the last major regulatory hurdle for the deal, which already had been blessed by the Justice Department and the Federal Trade Commission. The merger must be approved by shareholders of both banks, allowing it to be completed early next month. Both banks have scheduled special shareholders meetings for March 17 for the votes.

At public hearings held by the Fed in January in Boston and San Francisco, witnesses voiced concerns about predatory lending, possible closing of rural bank branches and the trend toward big banks getting bigger.

Last month, a federal judge in Honolulu _ saying he lacked jurisdiction _ dismissed a lawsuit against the central bank brought by Hawaiians seeking to halt the merger. But U.S. District Judge David Alan Ezra also criticized Bank of America for what he said was its failure to meet its commitments to Hawaiians.

Ian Chan Hodges, a spokesman for the Hawaii Fair Lending Coalition, said Monday that his group planned to appeal the Fed's decision in the 9th U.S. Circuit Court of Appeals, which has jurisdiction over Hawaii.

The Fed noted in its order issued Monday that Bank of America recently affirmed its intention to complete its goal for mortgage lending to Hawaiians.

The banks say the merger will give consumers an expanded choice of ATMs, branches and banking products.

In its merger review, the Federal Reserve also determined that the new bank _ to be called Bank of America Corp. _ would fulfill obligations under the Community Reinvestment Act, which requires banks to make loans in low-income and minority areas as a condition for opening new branches.

To reassure consumers, the Charlotte, N.C.-based Bank of America has said it would commit to investing $750 billion in community lending and investment over the next decade, including $100 billion in the mid-Atlantic and New England markets served by FleetBoston. FleetBoston says it has made $18 billion in community investments over the past four years_ ahead of its commitments _ though some community activists have questioned that.

Bank of America said that some job losses may be expected because of the ``elimination of redundant administrative positions'' but that employees who deal directly with customers will be largely unaffected.

Bank of America has 100-year-old roots in California, where it financed Hollywood movies and the Golden Gate Bridge. It was bought by NationsBank, which adopted the Bank of America name and moved it to North Carolina in 1998.

FleetBoston is the product of a series of mergers, having operated under names including First National Bank of Boston, Baystate Corp., Bank of Boston and, following a 1999 merger with Fleet Bank of Rhode Island, FleetBoston Financial.