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FLEET BANK CHAIRMAN PRESENTS -- 'CREDIT, INVESTMENT AND RECOVERY -- WITH VISION'

 BOSTON, Feb. 6 /PRNewswire/ -- The following is a speech delivered by Fleet Bank Chairman, President and Chief Executive Officer, Terrence Murray at 10 a.m., Feb 6 at the New England Competitive Cities Conference, Hotel Lenox, Boston. The Event was jointly convened by Mayor Raymond Flynn and Terrence Murray.
 "My assignment this morning is to suggest to you some ideas on our credit and investment situation in New England. And how that situation relates to the building of our economic recovery.
 Possibly in talking about these matters, which you may suspect are close to a banker's heart, I can add to your perspective or at least I can keep you reasonably awake. But, even if I accomplish that, I must also tell you that we will not move much closer to our overall objective of a better economy unless we deal with something much more complex: We must try to put those critical subjects in the context of an overall economic vision for New England.
 Developing a successful vision for a major corporation, or for a region, or for a great nation, is not easy work. Many who try to do it fail. Others only pay it lip service or they don't try at all. That is very perilous. And, indeed, life has been hard lately on business and government leaders who follow that course.
 For example, ask George Bush: He used to refer disparagingly to "the vision thing." He is now in Houston. Ask Robert Stempel, formerly of General Motors. Or John Akers, formerly of IBM.
 Vision is the stuff of leadership. It is essential for success. For without vision, you cannot rally disparate interests; you can not inspire great dedication and willingness for short-term sacrifice to achieve long-term gains. And only with a soundly constructed vision can you address and incorporate technology-driven change and the unexpected, both of which are occurring with increasing speed as we approach the new century.
 I don't have a tidy, ready-made vision for New England to offer to you today. But I do have some glimpses of what a successful vision for the New England Region at the beginning of the 21st century could look like:
 -- One, we will indeed, be a Region. Our states and cities
 will increasingly work together for the economic well-being
 of all. Our Region will combine in many appropriate areas
 all its economic and political power and its outstanding
 capabilities to compete successfully in a global economy.
 -- Two, we will be one of the world's great knowledge centers,
 incorporating and building on our enormous strengths in high
 tech, financial services, health care, education and
 research.
 -- Three, the Region will be one of the nation's most
 advantageous credit, investment and tax environments. That
 is essential for attracting, nurturing, developing and
 growing business -- essential particularly for innovative
 small and mid-size businesses and entrepreneurs that are
 the greatest source of new jobs and new wealth.
 -- Four, we will greatly enhance the quality of life and
 attractiveness of the entire Region, including rejuvenated
 urban centers all supported by a high-tech-driven
 infrastructure. And the first items on my quality of life
 list are safety, education, and health care.
 Is this regional vision possible? Absolutely! But to achieve it will take many groups of people from all segments of society -- business, finance, government, education -- all cooperating with one another, all determined to take strong civic-minded actions, all determined to rebuild and enhance our economic machine which is society's only true source of wealth.
 This moment in our economic history is critical. A recovery is underway. The latest government numbers on overall economic growth are generally good news: The gross domestic product in the last quarter of '92 grew 3.8 percent. That's the best performance in four years. New orders for durable goods jumped 9.1 percent in December -- also the best performance in four years. And we have a new administration in Washington poised to address the nation's economic challenges.
 As reported, the Administration's new economic plan is expected to include some short-term stimulus in the form of support for our infrastructure and some tax credits and incentives for business investment. There is no question that our infrastructure needs to be rebuilt and enhanced, and the speedup on some pending projects can be useful. But, far more important for the long-term future of the economy, will be the Administration's plans for working with the private sector on improving the financial environment for innovative business development; for retraining and educating our employees; and for such programs as national information networks, high speed rail transportation, smart highways, and major conversion of parts of the defense industry.
 Let's look at one of these programs. The development of a national information networks -- built on the backbone of a national data superhighway -- is of tremendous economic significance. Even more than the railroads in the 19th century... Even more than the national highway system in the mid-20th century, a national data network would link together communications throughout the nation and link the nation to the global economy.
 One of the developers of an early version of the electronic superhighway, computer scientist Lawrence Landweber of the University of Wisconsin, said recently that it will result in "nothing less than a revolution in the way we communicate." Everything -- huge libraries, medical x-rays, vast public and private sector databases, thousands of public and corporate video channels, interactive global conferencing, engineering designs -- all could be instantly available anywhere and at any time.
 A start on the program by both Government and Industry has been underway for the last several years. And the Clinton Administration has given development of the electronic superhighway a very high priority. It should. And I would suggest that the debate over whether it be developed by the Government or by the private sector begs the question. As Professor Landweber sums up the situation: "The complexity of the task is so great that it is absolutely essential that Government and Industry work together." This multi-billion dollar program, like other major initiatives being considered, calls for public/private partnership.
 New England is particularly qualified to play a significant role in these new major initiatives. What we have to do is to be alert to these opportunities; organize our total capabilities; and very proactively use our private sector and total political clout to become the major participants that we can be -- that we should be.
 Nor should our strategy be any different for opportunities that are smaller but still important building blocks for achieving our vision. Again, let me give you just one very specific example: An immediate opportunity open to us -- an opportunity that would have long-term impact on the growth of our financial services capabilities. And it would most certainly take advantage of an electronic superhighway. Currently, the Department of Defense is planning to locate up to six major accounting centers around the country. Two of the potential sites in the final running for a center are in New England. One is Bangor, Maine; the other, Southbridge, Mass. Each center will employ either 4,000 or 7,000 people, depending on how many centers are ultimately established. For the most part, these centers will create good, permanent jobs, and thousands of them will be new hires.
 We should not leave pursuit of those centers up to only the congressional delegations of Maine and Massachusetts. Our view should be that those centers will help New England achieve its economic vision. And we should marshal New England's political capability to present a solid case for locating at least one of them here. This is an immediate opportunity. The Defense Department is scheduled to announce a decision in mid-March.
 Both of these examples illustrate what I believe can be accomplished in a new era in business-government partnership.
 Historically, since the 1930's, the United States has never enjoyed Government policies that really support and nurture business. Our Government, if not actually an adversary to business, has clearly been unsupportive -- unlike governments in such countries as Japan, Germany and France. In its approach and attitude toward business, our Government's posture for the most part has habitually been one of regulation and paranoia about business. This attitude is outmoded and destructive. It must change.
 The private sector, on the other hand, has often tried to go it alone until it wanted some special and often self-serving favor. It has generally failed to create public understanding of a basic economic fact: The private sector must be successful to generate the money needed to enhance the overall public good. And it has mistrusted and looked down on Government and politicians. This, too, must change.
 The public-private partnership of this last decade of the 20th century must be a true partnership where both partners understand and respect each other's critical roles. And here in New England we must use that partnership to fight for our future as a Region. I suggest that as a critical part of this effort, we advance a strategic economic development plan for New England that includes several key components:
 -- One, our plan should focus on those business segments that
 clearly have the greatest growth potential both nationally
 and globally. These include segments such as information
 technology and telecommunications, health care and bio-
 technology, financial services, and knowledge businesses,
 including education.
 -- Two, our plan should specifically address seeking innovative
 use of existing research and manufacturing capabilities of
 our multi-faceted defense industry as it is trimmed back by
 federal budget reductions.
 -- Three, our plan should develop training and education
 programs to prepare our talented workforce for the future.
 Retraining of displaced defense workers and upgraded
 vocational education for the next generation of New
 Englanders are critical priorities.
 -- Four, our plan should design New England-wide tax
 incentives that encourage R & D and job expansion. Tax
 policy should be consistent, predictable, and effective
 in making the entire region more attractive to businesses
 that will employ New Englanders in the 90's. This policy
 should include the reduction and alignment of capital gains
 tax rates among the New England states.
 -- Finally, five, our plan should devise tax inducements in
 conjunction with a new regional economic development fund
 to encourage entrepreneurs to locate in our region and to
 develop products and services here.
 Let's take a closer look at these last two areas: Tax policy and direct financial support for start-up companies and firms that locate or expand in New England.
 First, tax policy. Today, the New England states compete with one another in a regionally destructive way. They grant tax abatements and other inducements to attract companies or get them to stay within their state borders. A firm considering a move often is faced with a barrage of conflicting offers when it investigates New England. And, presumably, each state manages to offer a disparaging view of the other five. Meantime, in the Southeast for example, states like Georgia and the Carolinas coordinate economic development and present a positive, cohesive face.
 The New England states would do well to join forces and come up with a consistent -- perhaps even a zero -- capital gains tax rate and other consistent tax incentives. Perhaps, firms also could be offered capital funding to encourage a move to New England or expansion of present operations. The net effect would be a boost for business development Regionwide.
 Second, financial support: Serious thought should be given to development of a regional economic development fund. Such a fund would provide low-interest loans and even grants for specific development projects and, thereby, help attract new business to the Region. We would be saying: "Come to New England and we'll not only provide an attractive tax environment but we'll provide some of the necessary capital."
 A regional economic development fund could work hand-in-hand with public and private venture capital funds, either for start-ups or for new projects at existing companies. Normally, venture capital does not have a debt component. But a development fund could provide bridge financing or even debt capital at attractive rates. The risk would be spread across ventures and across states. Such support would be in addition to the usual types of funding provided by such agencies as the Small Business Administration.
 How would we capitalize such a regional development fund? Clearly, the Region's banks would play a role. A company of Fleet's size might, for example, invest $10 million. Other banks would invest based on their size and additional criteria. Large insurance and manufacturing companies would also participate. Each of the six states might make modest investments. And our elected representatives might help encourage participation by the Department of Defense.
 I think participation by the Pentagon would be particularly appropriate. Today, there is practically no money in the defense budget earmarked for lessening the impact of defense-related disruption of local and regional economies. These economies are simply expected to absorb these blows of the post-cold war era. And some of the economies receiving the worst blows are in New England.
 The Office of Technology Assessment says that the defense build-down could hurt New England defense workers as much as the departure of the textile industry two generations ago hurt our textile workers. These defense workers -- truly victors of the 40-year cold war -- should not be rewarded with pink slips and a helpless shrug. They should be treated in the same fashion as returning veterans in World War II under the GI Bill.
 Savings expected from the defense build-down should be in the $50- $100 billion range. Perhaps as much as 10 to 20 percent of the savings could be used to help retrain these workers and help those areas of the country severely impacted by the defense cuts. New England's considerable share of these savings could be channeled through both the regional development fund and possibly through a new regional economic development commission.
 A regional economic development commission could undertake a number of important tasks that can best be handled on a Regionwide basis. Here are three possibilities: It could develop the training programs for displaced defense workers -- and displaced workers in general. It would study ways to take advantage of the defense build-down through conversion and use of research and manufacturing capabilities in other or new industries. And it might lay the groundwork for establishing a Regional R & D institute -- possibly at one of the Region's state colleges. The institute's purpose would be to assist Regional companies in specified areas of research and development -- especially companies hurt by defense cutbacks.
 Another area where a new public/private partnership can pay off significantly is in regulatory relief for our banking system. I have no quarrel with the need for tightened standards directed at some of the excesses of the 80's -- particularly in the commercial real estate market. But what we need is smart regulation that enables the banking system to provide credit intelligently where it can do the most good in building the economy -- credit to small business and the entrepreneurs who are the greatest source of future job creation.
 There is truly no credit crunch today as far as big business or consumers are concerned. Generally, most large companies can get as much credit as they need. And if you are a consumer with a reasonable credit rating, you can get a mortgage or a boat loan or a vacation loan or whatever you need. But if you are a small business, there you will find the credit crunch. And that exists because the regulations put in place during the last several years have eliminated much room for incisive judgment and forced what can only be called micromanagement of loan portfolios.
 For example, Fleet has a loan rating system of one through seven. One is triple-A; Five is substandard; seven is a charge-off. And most small loans -- at best, on the first day -- are rated a four under present standards. As a result, most bankers are gun-shy about putting a lot of four-rated loans into their portfolios. There is no room for error.
 And monitoring by regulators is almost continual. Rampant risk- adversity becomes the name of the game for both loan officers and regulators. But the American economy was not built on the deadening philosophy of risk aversion. This situation needs to be changed. The credit crunch for small business needs to be ended.
 There is still another opportunity where a change in gvernment attitude can help us all -- particularly our cities. I am referring to government's attitude regarding community reinvestment.
 Despite the recession, despite many business constraints, my company has worked hard to meet its civic obligations to the urban centers that it serves. For example:
 -- In Connecticut, we have committed $200 million to the
 Connecticut Works Loan Program for small businesses having
 difficulties obtaining credit. We also have committed more
 than $2.3 million to urban programs for low and moderate
 home buyers in Hartford, New Haven and New Britan.
 -- In Massachusetts we have committed approximately $111 million
 for affordable housing for low income and minority residents
 in communities throughout the Commonwealth.
 -- In Rhode Island, we are participating in a pioneering
 "Jump Start" Program to enable low to moderate income
 first home buyers to purchase homes at low interest with
 no down payment and no closing costs. And we have just
 committed to participate in a new $20 million small
 business loan and venture pool that will be funded by
 banks and the state.
 -- In Maine, our CRA-related consumer housing commitments
 totaled approximately $27 million last year.
 -- Fleet's New York bank is not only the largest SBA lender
 in New York, but ranks seventh in the nation in SBA lending.
 Our Rhode Island and Maine banks are also major SBA lenders,
 and we're working to increase our SBA lending volume in all
 of our markets.
 Fleet, as other banks, regards these initiatives as tremendously important in meeting our civic obligations to the communities that we serve. At the same time, we continue to need and seek Government understanding: such initiatives are possible only as long as we are viable businesses. And, in the end, we will be viable only if we can compete aggressively in our markets with many financial businesses that do not bear the same obligations that we bear.
 Again, we need true Government partnership. The banking system needs to be freed from archaic, obsolete restraints to serve its multi- state metropolitan markets and broaden its service offerings.
 In summary, we in New England have before us a tremendous economic potential in the closing years of this century. But to achieve it, we must have a vision of New England as a Region -- a Region of strong cities and states moving forward with a common mission. Knowing our capabilities, knowing the stuff out of which New Englanders are made, I am optimistic about the outcome.
 Thank you for your attention. In the time remaining, I shall be happy to try to answer any questions."
 -0- 2/6/93
 /CONTACT: Bruce P. Crooks of Fleet Financial Group, 401-739-5497 (home), or 401-278-6241 (office)/


CO: Fleet Financial Group ST: Rhode Island; Massachusetts IN: FIN SU:

ST -- NE001 -- 3815 02/06/93 10:03 EST
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