Paul Bass Photo
Israel Galan of the carpenters union.
Opponents of a proposed $1.5 billion takeover of New Haven’s last major locally-headquartered lending institution chose a surprising bank to praise as part of their argument: NewAlliance, yesteryear’s corporate bete noir.
Close to 300 opponents — including elected officials, buildings trades union members, community activists — filled Conte West Hills Magnet School auditorium Wednesday night to urge state Banking Commissioner Howard PItkin to reject Buffalo-based First Niagara Bank’s proposal to purchase NewAlliance Bank.
The turnout at the Pitkin-chaired four-hour hearing amounted to a dramatic show of local resistance to the deal.
Opponents argued that First Niagara has a poor community lending record — judged “satisfactory” under the federal Community Reinvestment Act (CRA). And they repeatedly contrasted that record with the “outstanding” rating earned by Elm Street-headquartered NewAlliance.
Seven years ago many of the same opponents filled the same auditorium to urge a previous banking commissioner to block the creation of NewAlliance as a shareholder-owned regional successor to a depositor-owned local mutual named New Haven Savings. The argument back then, in part: NewAlliance would roll back community lending.
First Niagara CEO John Koelmel defended his bank’s CRA record and promised to do more if the deal goes through.
In an interview before the hearing, Koelmel also offered noncommital but possibly supportive answers to the question of whether he’s open to the kind of concessions that may be emerging as an endgame to the standoff between his bank and New Haven leaders: significant new contributions to the city’s school reform and technology-oriented economic development efforts. (Click on the play arrow above to watch highlights from the interview.)
Koelmel made no commitments. And he has not been in discussions with Mayor John DeStefano, the leader of the fight against the proposed takeover and the key negotiator in 2003-‘04 when NewAlliance agreed to fund a community-bank competitor in order to win state approval to take New Haven Savings public.
An “Outstanding” Bank?
A parade of speakers took turns speaking for three minutes each over the four-hour hearing Wednesday night. All but two trashed the proposed deal, predicting it would destroy local jobs, remove local lending and charitable decision-making to Buffalo, and dry up mortgages and and business loans for low- and moderate-income New Haveners.
Seven consecutive speakers from Yale Law School focused on First Niagara’s record, especially its CRA record. Their point: The deal would produce more “adverse effects” than public “benefits,” a key legal standard in the approval process.
They repeatedly invoked the “outstanding” rating NewAlliance management has earned from regulators. First Niagara routinely earns only “satisfactory” ratings. When it has purchased other banks, speakers noted, it has lowered those banks’ ratings.
“Satisfactory doesn’t mean we failed,” CEO Koelmel said before the hearing in the Independent interview, which took place in the Conte West Hills library. “Satisfactory doesn’t mean we’re inadequate.”
He also said those “satisfactory” ratings were based on 2006-‘07 figures. First Niagara’s record has improved since then, he claimed.
First Niagara has filed a five-year CRA plan with the state. It included a $30 million lending pool with lowered fees and rates for low-income borrowers; a $750 million target for small-business lending; $100 million in community development loans; and $9 million in new money for community development projects.
Former Green party Alderman Allan Brison biked to the hearing.
Law professor Bob Solomon, a leader of New Haven’s fights against both this deal and the 2003-‘04 deal, noted in testimony Wednesday night that those First Niagara commitments don’t necessarily mean money for New Haven. They mean money for a local “market area” that now stretches from Hartford through New Haven down to Norwalk and Greenwich.
“A very nice community activity in Greenwich” will count, Solomon quipped.He predicted the new bank will “cherry-pick” Fairfield County and other suburban business.
He also noted the one New Haven community cause Koelmel mentioned supporting in his testimony: the New Haven Open at Yale.
“The great economic engine that will drive New Haven — a tennis tournament that takes place two weeks in August,” Solomon remarked, his voice redolent with sarcasm.
Peyton’s Parachute
For all the praise of NewAlliance’s CRA record, speakers eventually got around to the more familiar ground of bashing its departing CEO, Peyton Patterson.
Law student Kevin Jonke noted that Patterson stands to collect an estimated $23.4 million (or higher) payout for this deal alone, and four bank directors could collect another combined $17.4 million. That wealth should stay in New Haven and support affordable mortgages and small-business loans, he argued. He called the proposed deal “a grab for wealth by NewAlliance directors who did nothing to create that wealth.”
“We are amazed at reports of a $30 million payout to a single individual,” declared New England Council of Carpenters organizer Tim Sullivan (pictured).
“This payout does not create new meaningful jobs in Connecticut. What it means is a wholesale layoff of Connecticut workers, higher rates and/or new fees for consumers, and a fat payday for Peyton.”
Several speakers contrasted Patterson’s parachute with the fact that some NewAlliance tellers are on the state HUSKY health care plan because they earn so little money. “That’s despicable!” cried Fair Haven Heights Alderwoman Maureen O’Sullivan-Best.
Mayor DeStefano, too, took aim at Patterson when he spoke at the hearing. DeStefano, who started his day at 1:45 a.m. to deal with a triple-fatal fire in Fair Haven, sat through all the public testimony before offering his own, beginning after 8:30 p.m.
He noted that Patterson and other NewAlliance directors (some of whom he named) were absent from the Wednesday night hearing. He noted Patterson’s promises at the 2003 hearing not to turn around and sell the bank, and her argument back then that the state should support locally-based banks to keep out-of-state banks out of the market.
“She didn’t have the decency to come here tonight to stand up for the decision she decided to make,” DeStefano said. “I would have respected you all [Patterson and the directors] if you had done that.”
As for Koelmel and his First Niagara team, who sat in the front row next to the lectern where DeStefano spoke, the mayor said, “I don’t know these people.”
Will he get to know them before Commissioner Pitkin decides on the bank proposal?
Endgame
Commissioner Pitkin before the hearing with NewAlliance Vice-President Paul McCraven.
Pitkin would be setting a national precedent were he to reject the proposed deal outright. However he would be following the precedent of former state Commissioner John Burke were he to broker a compromise between DeStefano and the bank, the way Burke did in 2003-‘04.
In an interview this week, DeStefano declined to name any potential First Niagara gestures he’d consider acceptable should talks materialize.
He did say this: ““If you think about a lot of where New Haven’s been making its investments, it’s been in school reform and college-going,” he said. “On economic development it’s been around knowledge-based and life-science-based industry.”
Koelmel, meanwhile, was asked in the Independent interview Wednesday if as a deal-sweetener he might commit money in coming weeks to, say, New Haven’s school reform drive and tech-driven job-creation projects (such as Downtown Crossing).
He made no commitments.
“I don’t have any specific proposals. We just run our business,” he said.
But he also said this: “What’s you’re asking is completely aligned with, consistent with how we do business.”
And this: “You reference frankly examples of what we do every day. You talked about investments in education and other businesses. That’s what we do. I find some of this ironic. Those that are raising questions and challenging the opportunity don’t really understand us as a business, don’t understand our business model. As an organization we invest in youth and mentoring and education. That’s our philanthropic focus.”
When the Ash Wednesday hearing finally ended at 9 p.m., Koelmel and DeStefano actually had a face-to-face meeting. (See the beginning of the video at the top of the story.)
The meeting lasted under three seconds.
DeStefano walked up to Koelmel. He shook his hand.
“Mayor, great to see you,” Koelmel told him. “Thanks for your time tonight.”
This tape dispenser from City Hall held down anti-bank flyers outside the hearing.