Corp.'s proposed acquisition of Chase Manhattan Bank Thursday. At a hearing co-sponsored by the Federal Reserve and New York State Banking Department, several speakers said merging the banks into one $300 billion-asset institution would hurt community redevelopment efforts and increase the cost of banking services. "We believe that as banks get bigger, they must get better," said Phyllis Salowe-Kaye, executive director of New Jersey Citizen Action. "We don't believe that is the case here." The hearing, at the New York Fed, was held to gauge the $10 billion merger's effect on the community. Nearly 200 people were expected to testify before the hearings end Friday. Rebutting the criticism, Chase and Chemical officials said the merger will create a stronger bank, one better able to meet the community's lending and investment needs. "The merger will significantly enhance our financial capability and capacity to make investments in people and technology so that we can compete effectively in the increasingly challenging financial services area," Chemical chairman Walter V. Shipley said. "Only with an ongoing and sizable stream of investment will we be able to develop affordable new products and services that will be of benefit to our customers and the community as a whole." Mr. Shipley touted the new Chase's five-year, $18 billion commitment to provide affordable housing and community development financing. But the commitment did not impress activists, including Mary Clark, executive director of Citizen Action of New York. "Don't approve the merger until we can see some real money," Ms. Clark told the regulators. "There's no accountability to these promises." Matthew Lee, executive director of the Bronx-based Inner City Press/Community on the Move, said the merger should be rejected because the banks have violated the Community Reinvestment Act and fair-lending laws. Mr. Lee said Chemical, which holds $663 million in South Bronx deposits, made only 14 home mortgage loans there during the first six months of this year. He said Chase's mortgage company has similar problems, making only 38 of 1,519 loans to blacks and Hispanics in Los Angeles. "Chase's record is beyond bad," he said. "It is outrageous." Local political leaders also railed against the merger. Mark Green, New York's public advocate, a powerful political figure in New York, said Chase and Chemical already charge some of the highest fees for personal and small-business accounts. The merger, by eliminating a competitor, will free the bank to set fees even higher, he said. "The proposed merger is expected to result in the loss of 8,000 New York jobs," Mr. Green said. "Considering this heavy cost to New Yorkers - and the government support these two banks have enjoyed for years - it is only right that New York consumers and small businesses be given some refuge from the higher banking fees likely to result." State Sen. Franz S. Leichter, in urging regulators to reject the merger, said the banks haven't committed enough resources to economic development projects. "We cannot take what they are doing now as an acceptable baseline," he said. Not every lawmaker present opposed the deal. New York State Assemblyman Gregory Becker said the deal ensures that the biggest U.S. bank remains in New York City. Mark Willis, a senior vice president at Chase, disputed many of the claims made by activists and political leaders. In an interview, he said the banks are active in the South Bronx, controlling 30% of the home mortgage market. He also defended the $18 billion commitment, saying it is a major effort by the banks to remain the dominant players in the local community development business. The merger was backed by several groups that have worked with the banks in the past. "We strongly support the merger and are confident the merged entity will positively impact our community," said Madeline B. Dolan of the Albany- Colonie Regional Chamber of Commerce. The merger must be approved by both federal and state regulators. It was impossible to tell which way they were leaning; none had much to say at the hearing. This is the second such hearing this year. The Fed in August gathered public opinion on Fleet Financial Group's merger with Shawmut National Corp. That deal was approved this week. Mr. Shipley, speaking to reporters after his testimony, said the banks expect to receive the needed regulatory approvals in time to consummate the merger during the first quarter.

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