Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas July 9-10, 1998
Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Thursday, July 9, 1998
Transcript of Panel Fourteen
345 23 MS. SMITH: We are ready to start with 24 Mr. Butts. 25 MR. BUTTS: Good afternoon. My name is 26 George Butts and I serve as president of ACORN Housing 346 1 Corporation. ACORN, for those of you who may not know, 2 stands for The Association of Community Organizations 3 for Reform Now. And the ACORN Housing Corporation we 4 like to call the service arm of the organization, and we 5 provide loan counseling and some development. We are 24 6 states now, 24 cities now, with two hopefully opening by 7 the end of the year. 8 It's not the usual role for ACORN Housing 9 Corporation to testify to the Federal Reserve Bank in 10 favor of the merger of banks. This is a different role 11 for us. 12 We're living in a country where the home 13 ownership rate for white households is 72 percent, but 14 the home ownership rate for black households is 45 15 percent and Hispanic households of only 42 percent. 16 Redlining and unfair barriers to credit have profoundly 17 impacted our communities as we will continue to speak 18 out and we will continue to speak out on these issues. 19 But we're here today because NationsBank 20 stands out as a leader in the community reinvestment 21 field. They're leaders for some very specific reasons. 22 First, NationsBank has recognized that community 23 organizations are the vehicles for real success to the 24 community. 25 We have too many banks which believe that an 26 occasional loan to a community development corporation, 347 1 a small grant means a partnership. 2 NationsBank has invested in building the 3 infrastructure for the nonprofit community organizations 4 to grow and produce. For us that means our housing 5 counseling program has grown with Nations from five 6 cities to, now, 11 cities across the country. We have 7 expanded the housing staff working in Nation's cities 8 from 10 to 32. 9 Second, NationsBank has produced, the ACORN 10 Housing Corporation NationsBank partnership alone has 11 produced over $236 million in mortgages. Virtually all 12 of these loans were to lower income households with 13 small down payments, with non-traditional credit, with 14 cash-on-hand, with older urban housing stock, and these 15 loans performed well and with low delinquencies. 16 Third, NationsBank has been flexible. They 17 were the first multi-state lender to negotiate their 18 mortgage underwriting standards with us, and their 19 having stepped forward did a lot to bring our kind of 20 underwriting standards for low-income people into the 21 mainstream of the mortgage market. 22 At the time, these things were pretty 23 radical, but today no one thinks twice about the 24 appropriate use of low down payments, non-traditional 25 credit, foods stamps as income, voluntary child support, 26 cash on hand or steady income rather than the same job 348 1 for two years. 2 In the early days plenty of lenders talked 3 the talked but Nations rewrote the mortgage program. 4 Within the year, we were doing three to four hundred 5 mortgages a year in cities like Houston and Dallas, 6 Texas where other lenders told us low-income people told 7 us couldn't even own a house. 8 Fourth, NationsBank is innovative. We are 9 now talking with them about providing significant 10 pre-development and interim financing. Nonprofits lose 11 out on the bidding for affordable multi-family housing 12 project to wealthier for-profit speculators, unless we 13 can move quickly to evaluate and acquire 14 Nations is hammering a 30-day fast track 15 development fund so that more multi-family properties 16 around the country can be purchased, upgraded and 17 maintained as affordable housing by nonprofits. 18 NationsBank views their commitment to our communities as 19 part of their business. 20 Many lenders view the community reinvestment 21 as a legal obligation rather than a core market. 22 With their new $350 billion commitment and 23 their aggressive 50,000-unit target, we are seeing them 24 view our community as a market of its own. 25 For me, the single event that best 26 illustrates the NationsBank commitment to our 349 1 communities occurred a few years ago when the Community 2 Reinvestment Act was under attack in congress by radical 3 right-wing republican. NationsBank was the only 4 national bank that took a stand ino support CRA. 5 When I say public, I am not just talking 6 about writing letters. Cathy Bessant sat next to me in 7 front of a hostile banking chair who wanted to hand our 8 heads to us on a plate and told the congressmen exactly 9 what they didn't want to hear. 10 She testified that NationsBank was against 11 any effort to weaken the CRA. NationsBank was bucking 12 the industry mainstream, but the message was clear, 13 NationsBank saw the underserved covered by the Community 14 Reinvestment Act as their market. In that first 15 negotiation, that's exactly what we asked them to do for 16 us. 17 NationsBank 350 billion ten-year community 18 investment commitment is different from the commitments 19 we see from other lenders. 20 Nations senior management sat down for a day 21 with us and the product of those discussions shows up in 22 a single-family, multi-family and economic development 23 commitments. 24 (Bell) 25 MR. BUTTS: I'm not done. 26 But to sum up quickly, when the rubber meets 350 1 the road, they're not just talking the talk, they're 2 actually doing what they say they're going to do. 3 They'll make credit work for low and moderate income 4 people and they'll work with community institutions. 5 The fight for affordable housing and fair access to 6 credit is not over, not by a long shot. 7 NationsBank has been an ally among leaders 8 and the leader in these struggles, and we believe 9 they'll bring to Bank of America markets the same 10 attitude of innovation, flexibility and production. 11 Thank you. 12 MS. SMITH: Yes, please do submit your full 13 statement for the record. 14 Ms. Galvin. 15 MS. GALVIN: Yes. My name is Karen Galvin, 16 and I am a board member with the Summerhill Neighborhood 17 Development Corporation. SNDC is a nonprofit community 18 development corporation in downtown Atlanta that is 19 dedicated to revitalizing a community that is full of 20 assets that have been overshadowed by crime, poverty, 21 and drugs. My statements today are in strong favor of 22 the NationsBank acquisition of Bank of America. 23 Two years ago my husband and I began the 24 process of finding and purchasing a new home. We 25 weren't just looking for a house, we were looking for a 26 true community. One in which you could sit on the front 351 1 porch and wave to people, one in which neighbors knew 2 each other and looked after each other. 3 We were looking for a diverse, mixed-income 4 community in which residents felt empowered against 5 crime and urban decay. 6 Some friends of ours told us about the 7 Summerhill neighborhood. That was historically very 8 prosperous, had been overrun by highways, model cities, 9 crime, and was now in the midst of revitalization 10 efforts. 11 Our very first meeting was with a staff 12 person with SNDC and a representative of NationsBank 13 CDC. It was at that meeting I first heard of the 14 partnership between NationsBank and SNDC. It was at 15 that time I realized that both entities were committed 16 to rebuilding a community by uplifting its residents and 17 not just building houses. 18 My husband and I that day bought a house, but 19 we also bought into a vision. After moving into the 20 Summerhill community, the dedication of SNDC and its 21 partner, NationsBank, expired me to join the board of 22 directors. Since that time, SNDC has had numerous 23 partners, but none has risen to the level of commitment 24 that NationsBank has exhibited. 25 Other corporate sponsors have come into our 26 community, built a few homes, co-sponsored a few events 352 1 and moved on to the next media-focused area in the city. 2 NationsBank has proved time after time that 3 they are committed to being with us for the long hall. 4 The CDC always strikes the balance of 5 empowering the community to revitalize itself as opposed 6 to merely pouring money into various situations for 7 short-term solutions. 8 They have referred us to various resources to 9 assist with more development, introduced and advocated 10 for us with various foundations that assist us with 11 providing programs and services to our children and 12 elderly residents, and they have also provided technical 13 support for community mobilization against crime and 14 housing code violations. 15 Currently, they are in the process of 16 partnering with us to complete the Terry Place Housing 17 Development in which I reside, which is 40 houses which 18 are mixed income. They also just signed an agreement to 19 partner with us to complete another area in the 20 community called the Orchard. 21 The Orchard was started five years ago by 22 another bank institution that was partnering with us, 23 and it was left far from completion. Once again, 24 NationsBank saw a void and volunteered to assist us in 25 filling it. 26 I cannot begin to relate to you the 353 1 excitement and the appreciation of the residents in this 2 community. 3 In closing, I see the acquisition of 4 BankAmerica by NationsBank as an opportunity for 5 NationsBank to continue its positive work in even more 6 communities. 7 As a former antitrust attorney, I realize 8 that has businesses grow as quickly as NationsBank has 9 grown over the past few years, people start to get 10 nervous, but NationsBank has proven that they are a 11 responsible and committed citizen partner -- citizen 12 partner with us. As they continue to grow, I truly 13 believe that their efforts to empower people and build 14 communities will become even more far reaching parks. 15 I thank you for this opportunity to speak 16 today and again I fully support the merger. 17 MS. SMITH: Thank you very much. Ms. Ford. 18 MS. FORD: My name is Carolyn Ford. I'm the 19 Executive Director from North Florida Education 20 Development Corporation, and I come out of North 21 Florida. 22 I'm here to support the merger for 23 BankAmerica and NationsBank. As I listen to a lot of 24 the testomonies and I kept thinking what I had to say 25 about it from a personal basis, coming from a community 26 that's kind of void completely of banks altogether. 354 1 I'd like to talk a little about BankAmerica, 2 which is more or less a west coast bank, and how I 3 became involved with them. 4 I'm a recent graduate of DTI. That's 5 Development Training Institute. And BankAmerica 6 financed that fellowship partly. While I was there in 7 training, in training with other 35 nonprofits 8 throughout the nation, and I was trained in many things, 9 someone from a very rural community such as Gasden 10 County where you have 38 percent poverty level. This 11 kind of commitment from a bank is kind of unheard of in 12 our area. 13 Since that time, NationsBank has acquired 14 Barnett Bank which is in our area. So they have been in 15 our area about approximately six months. Since that 16 time they have reached out to our very impoverished 17 community. 18 I have had many meetings with the local 19 NationsBank community development person there, and we 20 are in the process of developing a partnership where we 21 can -- we'll be able to, really, to bring affordable 22 homes into the area. 23 The last home that was built in my county was 24 like in 1994. So you see some of the problems that -- 25 we have some local banks there, some home, rural banks 26 there, but home ownership and business development is 355 1 kind of unheard of. 2 So, with the merger of Bank of America, which 3 I know a lot about, and their commitment to low-income 4 communities and with the merger of NationsBank, it has 5 to be a win/win situation for us in North Florida. 6 Also, I am also involved with the Stand Up 7 for Rural American campaign where BankAmerica and 8 NationsBank are also members of their campaign. So 9 their commitment to rural America is -- to rural America 10 is just exciting at this moment, because, you know, 11 rural America has just kind of been overlooked pretty 12 much by everybody. 13 So, but their commitment in terms of the $10 14 billion in lending and investment to foster economic 15 development in our area is just exciting at the moment. 16 I think that with this merger there has to be the kind 17 of vision that all people especially in these -- in poor 18 communities throughout this nation to benefit from -- 19 it's just not how you benefit from. 20 A lot of the things that have been said here, 21 I have to agree, I really don't understand, so I rely on 22 you all to really tie down the numbers and really I 23 guess put their feet to the fire in terms of specific 24 kind of things, but, when it comes to partnerships, this 25 is unheard of in our area. 26 I just want to thank you for allowing me to 356 1 come here and speak to you and the fact that we support 2 the merger in North Florida. Thank you. 3 MS. SMITH: Thank you. Mr. VanbBrunt. 4 MR. VANBRUNT: Thank you, Madam Chairman and 5 members of the committee. 6 My name is Mark VanBrunt, I am a Deputy Vice 7 President for community development with the National 8 Council of LaRaza. NCLR is the nation's principal 9 national Hispanic organization representing more than 10 200 affiliated organizations in 32 states, District of 11 Columbia and Puerto Rico. 12 I personally serve this affiliate base with a 13 range of urban and rural housing community development 14 programs for 22 years. 15 As an organization, we're committed to 16 reducing poverty and discrimination and improving life 17 opportunities for the more than 30 million American of 18 Spanish descent. 19 NCR approaches these issues from two 20 positions, two roles and perspectives. As an advocate 21 we're very much interested in the larger policy 22 implications of legislation, it's implementation and the 23 rule making that's associated with that that may produce 24 disparate impacts on Latinos in all income and ethnic 25 communities. 26 To this end, we would submit to the board 357 1 formal comments which are attached for the record. 2 But NCR is also very concerned about helping 3 affiliates achieve a meaningful local impact for our 4 common customer, which is the Latino family. 5 Briefly, I'd like to inform the board of some 6 concrete ways in which the current bank relationships 7 have had this kind of impact. I should say I'm not 8 familiar with the whole national, the totality of it and 9 the national scope of their activities, but I would 10 speak to ours with our affiliates. 11 I can only echo previously, what's previously 12 been said about a long relationship with Bank of 13 America, being our office serving predominantly the 14 southwest. The support of the community development 15 staff, the capital of particularly the community 16 development bank and more recently we have great 17 expectations for the Rural 2000 initiative and its 18 resources. 19 Our relationship with Nations is a lot more 20 recent, the last -- just over the last two years. They 21 have made some significant commitments that have 22 enhanced our capacity and effectiveness to particularly 23 have some local impact with our affiliates, three ways. 24 First, we've really received some direct staff support, 25 support that has allowed us to reach new markets and 26 more affiliates with transactions that are both 358 1 traditional and non-traditional. 2 So, in addition to housing development and 3 home ownership network which we've pursued for sometime, 4 we have been able to assist affiliates with other 5 priorities such as essential community facilities, 6 charter schools and economic development projects. 7 Secondly, pre-development and capacity 8 investments to these projects by Nations has proved very 9 critical in helping them become operational in starting 10 them up. 11 Third, I'd say, especially over the past 12 year, the Nations community development staff has played 13 a key role in helping us evaluate and define investment 14 strategies and products to serve more of our affiliate 15 base in some unique ways. 16 This same kind of commitment has been 17 extended to a number of affiliates and their boards 18 themselves, which we have appreciated. 19 To this end, NCR expects to soon consummate 20 an agreement with the bank as a major capital 21 contributor to our expanding affiliate partnerships, 22 which we call the Initiative to our Partnerships of 23 Hope. 24 In conclusion, I would characterize our 25 relationship as very positive and fruitful and we would 26 say that we have every expectation that the merged bank 359 1 would be able to address both the policy concerns raised 2 in our comments as submitted and continue to expand the 3 investments which I have described above, which are so 4 critical to expanding and reaching Latino market. 5 Thank you. 6 (Pause in proceedings to change Court 7 Reporters.) 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 360 1 MR. McNULTY: My name is Robert McNulty. I'm 2 president of Partners for Livable Communities. My 3 statements today are to emphasize the key involvement of 4 NationsBank and the leadership of community investment 5 over the last decade in this country. Partners is a 6 25-year-old nonprofit organization that grew out of a 7 national conference on neighborhoods. 8 Our board is made up of governors. Paris 9 Glendenning serves on our hoard, commentators, Neil 10 Pierce, the writer, the publisher of Governing Magazine, 11 Peter Harkness, Mayor Webb of Denver, Monsignor Linder of 12 the New Community Corporation is vice chair of our board, 13 and the chair is Linda Good. Past trustees have included 14 Michael Wu of Los Angeles City Council, Wanda Vinski, and 15 currently serving on our board is Katherine Vinson of 16 NationsBank. 17 Partners believes livability is an equal 18 opportunity goal. We use community mobilization 19 asset-based conference. Community development strategies 20 and social equity are the concept of fairness as 21 strategies to effect change and create more livable 22 communities for all citizens. 23 Partners has served as a bridge to create 24 first-time racial partnerships in Richmond, Savannah, 25 Memphis, Chattanooga, and recently we put together a 26 white leadership pledge of $200 million investment in . 361 1 downtown Kansas City in the historic African-American 2 18th and Vine neighborhood. 3 Thus I do not come lightly to the statement that 4 NationsBank, through its Chair Hugh McColl, through it's 5 president Ken Lewis, and for the president of the 6 community investment, Kathy Bessant, have put in place in 7 the last decade a culture of community reinvestment 8 leadership for the corporation, for their market 9 communities, and for a national policy on this agenda 10 that is the exemplar in the country, bar none. 11 As examples, we are pleased to be associated 12 with NationsBank in 1992, '93, and '94 with a republican 13 secretary of HUD, a democratic secretary of HUD, a 14 republican secretary of HHS, and a democratic secretary 15 of HHS to research with Johns Hopkins a way of 16 restructuring the categorical programs to try to give 17 more independent ability of supporting families and 18 community across America. This result was published and 19 distributed, was sponsored by NationsBank, some six years 20 ahead of the restructure of welfare entitlements. 21 We were a cosponsor of Blueprint 2000, a program 22 undertaken by NationsBank with the National Community 23 Reinvestment Coalition, the National Council of LaRaza, 24 the National Urban League in 1994, '95, and '96, which 25 brought together 500 citizens throughout NationsBank's 26 community of trying to create a team work to meet . 362 1 community reinvestment goals and set priorities for 2 furthering. 3 We were also part of a planning team for 4 community capitalism, rediscovery of the market of 5 America's urban neighborhoods hosted by Columbia 6 University in 1997, chaired by Hugh McColl. All 65 7 business leaders, government, and community practitioners 8 called for a self-interest redefinition of investing in 9 the economics of our inner city. Again, a leadership 10 initiative continuing today done by NationsBank. 11 For these acts and many more, I urge that the 12 merger of NationsBank and Bank of America proceed and 13 that we look forward to continuing leadership on the 14 field of community reinvestment, continuing redefinition 15 of both profit and opportunity and community value as 16 NationsBank has done for the last ten years. Thank you. 17 MS. SMITH: Thank you. I don't have our last 18 speaker's name. 19 MS. GARRETT: My name is Pat Garrett. I'm the 20 president of the Charlotte-Mecklenburg Housing 21 Partnership in Charlotte, North Carolina. First I'd like 22 to thank all of you for letting us have an opportunity to 23 tell you about NationsBank commitment to our housing 24 partnership and to our local community. 25 Charlotte-Mecklenburg Housing Partnership is a 26 nonprofit housing developer providing affordable rental . 363 1 and home ownership in the Charlotte area. Since 1990, we 2 have produced 300 single family homes and 700 rental 3 units. Many of those homes would not have been developed 4 without the assistance of NationsBank. The average of 5 all our families served is 60 percent or less of median 6 income. 7 NationsBank has been one of our major partners 8 of our organizations as we have developed and implemented 9 our strategies for housing development. In fact, 10 NationsBank was instrumental in setting up the 11 partnership. The corporation provided initial operating 12 support and senior executives that committed many hours 13 of work as we developed our programs for single-family 14 and multi-family housing. 15 In the area of home ownership, NationsBank has 16 made a major commitment to our single family loan 17 consortium, which has now made over 270 loans to low and 18 moderate income buyers, utilizing relaxed credit 19 standards and at a reduced interest rate. This 20 commitment of over $5 million is more than 75 percent 21 encumbered, and the bank has indicated its willingness to 22 commit additional funds, as well as to assist in the 23 establishment of a second mortgage pool so that we can 24 sell these mortgages to neighborhood reinvestment. 25 Nations was selected by the other five bank 26 members to act as the lead bank. We can count on . 364 1 NationsBank to be out in front in the development of new 2 mortgage products such as the most recent acquisition 3 rehab product, as well as some issues such as the 4 recognition of the need for lenders to reimburse for the 5 cost of home ownership counseling. 6 A major part of our organization's focus has 7 been on reclaiming deteriorating high crime areas. As a 8 part of that focus, NationsBank employees, including 9 executives, volunteered numerous hours in rehabilitation 10 projects. Although the houses have been sold, we still 11 refer to several of those houses as NationsBank houses 12 because of the extensive work undertaken by the bank 13 employees as well as the support that they provided to 14 the new homeowner. 15 NationsBank has also provided financial support 16 for our multi-family developments. The bank provided an 17 equity investment for our second tax credit development. 18 Most importantly, the bank provided both construction and 19 permanent financing for the renovation of four former 20 housing authority complexes that we were able to 21 acquire. This produced 171 affordable rental homes and 22 also provided a cash flow stream to our organization that 23 enables us to carry out other affordable housing 24 efforts. 25 Not only has nations been a good partner as 26 Charlotte-Mecklenburg Housing Partnership carries out its . 365 1 mission of providing affordable housing, but the bank has 2 been instrumental in several other areas that improve 3 housing in our community. 4 NationsBank has been involved in a Hope 6 5 project to revitalize a very distressed public housing 6 complex and to remake it into an economically integrated 7 community. This project was done in cooperation with the 8 Housing Authority, the city, and our organization. The 9 same team is now uniting to revitalize another extremely 10 distressed public housing community, and we are waiting 11 word on our Hope 6 application for this project. 12 NationsBank is innovative in their investments, 13 with the impact of the project typically taking precedent 14 over the return of the project, and thus many of the 15 investments are structured to help to build the capacity 16 of the nonprofit developers and to have a significant 17 impact on the neighborhood. 18 Perhaps the most valuable service NationsBank 19 has provided to our organization is the dedication of 20 senior level executives at the board level to serve on 21 the board of directors, board committees, and as 22 consultants on specific issues. 23 Whether it's a video to promote our organization 24 or an analysis of a complicated loan, we know that we can 25 count on NationsBank to help us out. 26 In summary, NationsBank has truly been a partner . 366 1 in our housing and community redevelopment efforts, and 2 we look forward to a continued relationship with them. I 3 believe that they care about the communities that they 4 serve and that they will develop strong partnerships in 5 new communities. 6 MS. SMITH: Thank you very much. One 7 question. 8 MR. FRIERSON: Mr. Butts, I wanted to follow up 9 on your observation that this is an unusual position for 10 your organization to be in. 11 We've heard a lot of criticism today about the 12 NationsBank CRA pledges lacking in specifics, and I 13 believe you were -- just when you ran out of time, you 14 were getting ready to discuss the -- your views of the 15 pledge. And I'd like to give you the opportunity, if you 16 would like, to expound on how you view the pledge. 17 MR. BUTTS: Thank you. What happened was we 18 sat down that day with them and talked in real terms 19 about what this $350 billion would really mean, that we 20 didn't want it to be a hollow -- just a number that 21 looked good. 22 I think one of the examples that somebody 23 commented was we viewed this in contrast with the 24 Citibank/Travelers commitment. They haven't even met 25 with us to talk about their commitment yet. The 26 NationsBank commitment and mortgage production loan . 367 1 equals the Citibank/Travelers total commitment. 2 And I think the difference -- the difference is 3 that there's something backing up this commitment. It's 4 not the commitment in terms of public relations. It's 5 commitment in terms of what they really think they can 6 do, what real programs are going to come out there, and 7 that the real commitment comes from the top down. I 8 mean, I've seen them grow into these commitments. 9 So our history with them is long enough and 10 we've done enough agreements with enough banks that I can 11 see the difference between what a NationsBank commitment 12 means and what some other bank commitment means, and 13 that's really why I'm up here talking about them as 14 opposed to talking about other people who have merged. 15 This is the first time we've done this. 16 And to me, I put a lot on the line to come out 17 and say this, but I believe it to be true. If I didn't 18 believe that they were the kind of people that they were 19 doing this and that these commitments are real 20 commitments and not public relation commitments or stuff 21 to make it look good but they really want to change these 22 communities -- I mean, our first bunch of meetings were 23 not pleasant experiences for either one of us, you know, 24 and to see that movement from those meetings to the 25 meetings we have now has shown me that this is real. So 26 I can stay here and say with conviction that this is . 368 1 real. 2 MR. FRIERSON: Thank you. 3 MS. SMITH: Thank you very much for your 4 testimony this afternoon. And with that, we'll move on 5 to Panel 14. We'll go ahead and start. And if there are 6 other members of the panel, they can join us as we go 7 along. Mr. Espinosa.
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