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Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Friday, July 10, 1998
Transcript of Panel Twenty-Six
569 1 MR. BLASDELL: I have a prepared statement 2 for anybody that wants them or needs them. 3 Introduction: NEH and SALT, the Suburban 4 Alternatives Land Trust, are two affiliated Marin 5 County-based nonprofit community development and 6 affordable home finance corporations. I was a founder 7 of NEH in 1978 and in 1993 of SALT, which incorporated 8 this year, 1998. As a developer/builder of new homes 9 for almost two decades, I have known the difficulties of 10 seeking and securing the cash and the credit needed to 11 build and finance subdivisions and individual homes, 12 sales and purchases, we produced over 2,500 homes, more 13 than one in four affordable. 14 I particularly have had extensive experience 15 assisting low-income first-time home buyers buying their 16 first home in Marin, one of our nations most 17 unaffordable and difficult own housing markets, and more 18 recently with CASA HOME Loan contracts in ten Bay Area 19 cities. 20 Support for the merger: On behalf of NEH and 21 SALT and the many low-income clients and working 22 families we have served over the last two decades, I 23 support the merger as I understand it from the publicly 24 available materials that have been provided to me and to 25 us. 26 At this time, as this is the first merger 570 1 discussion in which I have participated, I am unclear 2 about the roles and process after today's hearing is 3 closed. However, I offer the following additional 4 comments for your considered action: 5 Whether or not the Federal Reserve Bank of 6 San Francisco retains review and control over subsequent 7 CRA evaluations of New Bank, as I referred to this, I 8 think clear and adequate written direction is important 9 now in case any other Federal Reserve Bank gets 10 jurisdiction. This can assure that California's diverse 11 credit and banking needs are properly and adequately 12 understood as well as provided for by those farther 13 away, measurable and profitable result must be the 14 standard achieved by the New Bank from a perspective of 15 its new stockholders, any new regulators and ultimately 16 by the number of new customers they secure beyond all 17 existing customers they retain. 18 Second item. New Bank should make adequate 19 written commitments establishing the numerical targets, 20 goals and/or minimum CRA activities for California, 21 e.g., make separate California commitments especially 22 for program areas such as charitable giving, foundation 23 operations and maintaining the state/community bank 24 staff headquarters here. 25 I would like to say on a personal and more 26 anecdotal level that the Federal Reserve Bank is who I'm 571 1 speaking to directly obviously very directly in this 2 hearing, not the two banks involved in the merger. But 3 I want to thank the Federal Reserve Bank for being so 4 helpful with the programs that our nonprofit has 5 developed throughout the Bay Area recently, 6 There is an attachment here from your 7 community for quarterly from '96, it has really been 8 helpful. 9 We have never done business with Bank of 10 America, although I am a valued customer, have a 11 personal account, over 25 years in my personal accounts. 12 We have brought projects to Bank of America, 13 we have been supported with grants, we have had people 14 volunteer from Bank of America, but we have never done a 15 deal with Bank of America. So I have no business 16 conflict or position with respect to why I support the 17 merger. 18 I would like to say for having been -- I'm a 19 fifth-generation Californian, my father's family came 20 here from Scotland via Boston a decade of the Gold Rush. 21 And I think the 33 million people that came after that 22 have made California a very powerful, wonderful, nation 23 and state. 24 I think the efforts of Mr. Giannini in 25 creating the Bank of Italy here in San Francisco was 26 very fortuitous and powerful. 572 1 For those of you that haven't had the 2 opportunity to read the biography of the bank, the story 3 of Bank of America, into the record should go this 4 publication done in 1954, written by Mark Heath James 5 and Betsy Jessie Rollin James, and it sets forth that 6 this is the completion of A. P Giannini's dream from 7 North Beach where people not being served because they 8 were the Italian community in the wrong pat of town. I 9 think this in fact completes the dream of the Trans 10 American vision 11 MS. SMITH: Mr. Bonnett 12 MR. BONNETT: Thank you. I want to thank the 13 Federal Reserve Bank for providing this forum to testify 14 in the proposed merger. 15 My name is Alvin Bonett. I am here 16 representing Ecumenical Association for Housing. It's a 17 nonprofit housing development housing corporation that's 18 been in existence for some 30 years. Our headquarters 19 are in the San Rafael, California. Just a comment that 20 the corporate name may be a little misleading, we're not 21 a religious organization. 22 We have over the years developed more than 50 23 affordable properties throughout many different kinds of 24 communities in California and Hawaii. Those are home 25 ownership type developments, rental developments for 26 seniors, family, disabiled, a really wide-ranging number 573 1 of properties and residents. The properties so far 2 total more than a quarter of a billion dollars that we 3 have developed. Most importantly, all of those 4 permanently affordable. 5 We have done business with many different 6 lenders over the years and we consider the Bank of 7 America Community Development Bank to be a leader in 8 lending in affordable housing. We just don't see a 9 whole lot of comparable structure there, which I want to 10 comment. 11 EAH itself is not opposed to the proposed 12 merger, nor do we support it, but there are two remarks 13 that I do want to make. One about the community 14 development bank itself. 15 We found that in comparison that the 16 structure of that bank is really very special. It has 17 the most appropriate structure in terms of being 18 vertically integrated and being able to serve our needs 19 as a developer and manager of affordable housing. 20 That structure allows them to make rapid and 21 accurate decisions on credit and that is not shared by 22 all lenders. They are able to quickly distinguish 23 between routine matters and very important matters in 24 lending. That is also not shared by all lenders when it 25 comes to affordable housing. 26 Their way of working with credit decisions 574 1 and being able to speak as almost a single voice from 2 top to bottom is not shared by many lenders today. They 3 understand the business of nonprofit housing 4 development, which, in California, is a very large 5 activity. They also understand the lower-income housing 6 markets, which is not shared by all lenders. 7 They understand California, which is really 8 like four different states. The Northern California, 9 Southern California, the coastal and the inland all 10 operate in -- as market areas very differently from each 11 other and have to be handled differently. 12 The other point that I wanted to comment on 13 is that Nationsbank has its own community development 14 corporation, which, if brought to California, will 15 provide a competitor to organizations like ourselves and 16 other private and nonprofit developers here. That gives 17 us a great deal of concern given the level of 18 competition. 19 In conclusion, I want to say that the merger 20 should not diminish nor compromise the business 21 structure in the capacity of the Community Development 22 Bank. It's done very, very well and I'd hate to see 23 anything change that. 24 Secondly, the merger should not produce 25 business activities that compete with or compromise the 26 existing client relationships that we share with the 575 1 Community Development Bank. 2 Thank you all once more. 3 MS. SMITH: Thank you very much. 4 Ms. Guilfoil. 5 MS. GUILFOIL: Good afternoon. My name is 6 Martina Guilfoil. I am Executive Director of Inglewood 7 Neighborhood Housing Services in Inglewood, California. 8 INHS is one of 181 member organizations of 9 the National NeighborWorks Network, a network that works 10 to revitalize, urban, suburban and rural neighborhoods 11 across America. 12 NeighborWorks organizations create healthy 13 communities by working with residents, business peoploe, 14 government officials and and other partners. Together 15 these partners create new housing, rehabilitate existing 16 housing, develop multi-family housing and help lower- 17 income families become homeowners. 18 NeighborWorks also identify and help develop 19 resident leaders, stimulate residents to work together 20 to improve the appearance and safety of their 21 communities and work with other civic organizations and 22 solve social problems and improve the quality of life in 23 their communities. 24 Today I'm here on behalf of the National 25 NeighborWorks Housing Network, a membership organization 26 of NeighborWorks organizations. NNHN acts as an 576 1 advisory group on public policy that promotes community 2 development activity in our communities. Since the 3 primary activity of most NWOs is to channel loan 4 capital, mostly through conventional lending 5 institutions to lower-income communities and borrowers, 6 bank modernization is a concern to us. 7 NNHN wants to ensure that reinvestment and 8 access to flexible lending and credit products continues 9 to happen through this modernization process in our 10 neighborhoods. To this end, we have hosted several 11 meetings with Bank of America and NationsBank to discuss 12 partnership opportunities that will help them deliver on 13 their $350 billion commitment to the community. 14 These opportunities include multi-family 15 lending and investment, first and second mortgage 16 lending for home ownership, investments and 17 participations with local NWOs and home ownership 18 counseling and education. 19 Presently, there are at least 60 NWOs 20 operating in 22 states that have formed partnerships 21 with Bank of America and NationsBank or other 22 institutions acquired by one of them. In addition, 23 there are approximately 50 other NWOs that exist in 24 these bank service areas that could enter into similar 25 partnership. 26 From 1995 to 1997 the NeighborWorks network 577 1 captured a total of $1.3 billion in direct investment. 2 Of that total direct investment, 65 percent or 863 3 million occurred within the 25 states where Bank of 4 America and NationsBank operate. Seventy-two percent of 5 that 863 million was invested in home ownership units at 6 an average cost of $69,203. The remaining investment 7 was for rental and mutual housing. And, just to note, 8 60 percent of all of the network's first mortgage 9 borrowers are minority households. 10 NNHN is supportive of this merger providing 11 this does not does not dilute the cumulative efforts 12 that the two banks would make independently of one 13 another, but, in fact, leads to a significant expansion 14 and investment in distressed communities. 15 NNHN believes Bank of America and NationsBank 16 will need to develop strong partnerships in order to 17 deliver on their $350 billion commitment. 18 In addition, in order to increase their 19 lending rates to minority household borrowers and 20 maintain deliveries of special niche products that are 21 so vital to our local communities, we encourage strong 22 partnerships to be developed so that lending can occur 23 at a local level. 24 MS. SMITH: Thank you very much. 25 Mr. Gottschall. 26 MR. GOTTSCHALL: Good afternoon. My name is 578 1 Bruce Gottschall and I am Executive Director of 2 Neighborhood Housing Services of Chicago, one of the 3 member organizations of NeighborWorks network. 4 Just to give you a little background on NHS 5 in Chicago, we are a 23-year-old partnership of 6 residents, lenders and in the city government. We are 7 actively working in 18 differrent neighborhoods in the 8 City of Chicago and partnered with about 200 financial 9 institutions in that area. 10 Ourselves directly have been involved making 11 10,000 loans for housing rehabilitation, home 12 improvement, home ownership and community development 13 over that 20-years-plus activity impacting more than 14 20,000 units. We're involved nationally with the 15 NeighborWorks campaign for home ownership and with the 16 Neighborhood Housing Network. 17 In Chicago, the Bank of America and its 18 predecessor organizations, Continental Bank and Bank of 19 America Illinois, have been leaders in assisting NHS of 20 Chicago to serve the credit and community development 21 needs of an increasing number of people and 22 neighborhoods over the last 23 years. 23 This is one example, ten years ago, then, 24 Continental Bank made a $20 million commitment at 25 below-market rates to develop the Chicago home ownership 26 program, which assisted NHS of Chicago to become 579 1 Illinois now only not-for-profit mortgage bank and 2 substantially increased our capacity to be a community 3 development lender. 4 Five years ago, when Bank of America entered 5 the market, they expanded that commitment to the home 6 improvement program to $40 million and invested in the 7 development of a new NHS operation had the West Humboldt 8 neighborhood, assisted in funding increased commitment 9 to NHS's lending capacity, to market the lending 10 programs, to assist in funding the high interest -- 11 excuse me, high risk revolving loan fund -- it's not 12 high interest, it's usually low interest -- to support 13 the NHS operation in other Chicago neighborhoods. 14 Bank of America community development staff 15 have provided personal leadership in the expansion of 16 NHS staff activity in Chicago neighborhoods. Among 17 other things, their consultation in financial planning 18 prepared NHS to submit and be approved for matching 19 funds as a community development financial institution. 20 In Chicago, the Bank of America's leadership, 21 involvement, investment, lending and grant relationship 22 has produced benefits for neighborhoods and families. 23 In past mergers, the new entities have 24 increased their resources to NHS of Chicago and to the 25 community. 26 As NHS of Chicago continues to fulfill its 580 1 community development and lending commitments in the 2 neighborhoods, our expectation, based on past 3 experience, is that Bank of America and NationsBank will 4 increase resources based on their size and institutional 5 capacity. 6 We're supportive of this merger because of 7 our very positive history and working relationships with 8 Bank of America in Chicago. In addition, our 9 discussions with Bank of America and NationsBank 10 representatives make us optimistic about their 11 commitment to communities and to partnerships. 12 The $350 billion commitment demonstrates this 13 in the interest in developing local partnerships give 14 specific avenues that these resources can be delivered 15 in local communities. Because of this, we believe it 16 will result in increased resources for community 17 development. 18 Community development, by its very nature, is 19 local. In order to fully transform those underserved 20 neighborhoods, like the neighborhoods which NHS 21 operates, specialized programs and products are needed 22 that address very specific problems that cause decline. 23 The NeighborWorks network is actively engaged with Bank 24 of America and NationsBank in developing innovative 25 partnership to bridge this gat and creative mechanism 26 responive to local communities. 581 1 We are working with Bank of America and 2 Nations to strengthen and enhance the national 3 commitment as well as, extremely importantly, build on 4 local partnerships and strengthen their capacity. 5 We are confident this working relationship 6 and the commitment to community development and 7 innovative local and national partnerships will result 8 in effective and additional resources. 9 NHS appreciates the opportunity to testify at 10 these hearings because it focuses the attention on the 11 need to sustain and enhance local community development 12 efforts and resources. Thank you 13 MS. SMITH: Thank you very much. Ms. Reese. 14 MS. REESE: Thank you and good afternoon. My 15 name is Kate Reese. I'm the executive director of 16 Neighborhood Housing Services of St. Louis. Our 17 organization is one of 181 nonprofit and community-based 18 housing corporations of the NeighborWorks networks. 19 Neighborhood Housing Services of St. Louis 20 provides services to low-to-moderate-income households 21 in the form of home repair loans and home buyer and 22 insurance education to allow for successful home 23 ownership experiences in neighborhoods throughout the 24 St. Louis region. 25 The board of directors of Neighborhood 26 Housing Services of St. Louis is in support of the 582 1 merger of Bank of America and NationsBank, due in part 2 to a leadership role that NationsBank has played in 3 redevelopment efforts in the St. Louis area. 4 Since their acquisition of Boatmen's Bank, 5 NationsBank has put together a team of St. Louis's in 6 their community investment and development departments 7 that already has made an impact in St. Louis and with 8 our particular organization. 9 I really would like to stress the importance 10 of having the right St. Louis since taking the right 11 job. I think that was key to the success they've had in 12 the last year. 13 Last year and again this year, NationsBank 14 has been one of our top private-sector partners and has 15 provided important funding to enable us to market our 16 product, undertake crucial planning efforts and grow our 17 home ownership program to provide critical, one-on-one 18 counseling and education to make the goal of home 19 ownership a reality. 20 We expect to have more than doubled our 21 capacity during 1998 with the assistance of NationsBank 22 and our outreach program. 23 On the national level, I have been involved 24 in some preliminary conversations with both Bank of 25 America and NationsBank. They look more than promising 26 towards the end of, one, increasing development and 583 1 production of affordable housing units, two, making 2 mortgages available to low and moderate income families 3 to help stabilize our neighborhoods, and, three provide 4 the important counseling and education that ensures that 5 the home ownership experience is successful for both the 6 family and the community in which they choose to buy. 7 With the local track record in St. Louis and 8 the promise of a very comprehensive plan for the future, 9 I say, without a doubt, that I look forward to the 10 merger of NationsBank and Bank of America and the 11 commitment they are making to the work of community 12 development organizations across the country. 13 It was exactly one year ago, and maybe to the 14 day, when Nations officially opened their doors in 15 St. Louis. I have to admit that those of us in the 16 nonprofit world in St. Louis were a little bit nervous. 17 We'd had a very good track record with Boatmen's in the 18 past and our nerves were on edge. 19 But I can truthfully say that nations has 20 lived up to prior commitments made by Boatmen's, and, 21 indeed, exceeded their goals in the past year in 22 reinvestment in our community. 23 Thank you. 24 MS. SMITH: Thank you very much. 25 Ms. Wagstaff. 26 MS. WAGSTAFF: Thank you. My name is Fran 584 1 Wagstaff, and I'm pleased to be here this afternoon 2 representing the Nonprofit Housing Association of 3 Northern California, NPH. 4 NPH is a membership organization of some 500 5 members, including regional and community-based housing 6 nonprofits, service providers, consultants, lenders 7 public agencies and other parties involved in the 8 production of management of affordable housing in 9 Northern California. 10 I'm a nonprofit developer and a member and 11 past president of NPH. As director of Mid Peninsula 12 Housing Coalition, I secured the first CRA multi-family 13 loan in California by the Bank of America for 14 multi-family housing and I've used Bank of America for 15 numerous loans since that time. 16 Nonprofit Housing Association has not taken a 17 position for or against the merger, but I am here today 18 to emphasize NPH's concerns regarding the proposed 19 merger and its effect on our constituents. 20 First I want to describe the active and 21 strong network of Nonprofit Housing Organization which 22 exists here. NPH last conducted a poll of nonprofit 23 housing production in 1995-'96. In the nine Bay Area 24 counties we found that non-profits had produced over 25 15,000 units of houseing in the prior six years at a 26 development cost exceeding $1 billion. In one year 585 1 alone, 1994, nonprofit housing production accounted for 2 61 percent of all multi-family housing built in the 3 region. Eighty-six percent of this housing serves 4 low-income households and over 50 percent is targeted to 5 very low-income households. 6 Unlike for-profit housing, this housing 7 promises to remain affordable for the long term. 8 Our active nonprofit community has been 9 involved for many years in helping to shape the programs 10 that are offered by the Bank of America Community 11 Development Bank. This bank, based in California, has 12 understood the unique needs of the housing market which 13 has the dubious distinction of being the least 14 affordable in the nation, according to a recent study by 15 the Center for Budget and Policy Priority. 16 We have benefited by this California presence 17 and have counted Bank of America as an important partner 18 in addressing local needs and in building local 19 capacity. For example, the Bank of America Challenge 20 has encouraged talented graduate students to study 21 affording housing development and compete with their 22 peers by developing affordable housing proposals. This 23 Challenge competition has generated competent staff for 24 many nonprofit agencies, thus helping to build capacity. 25 We would like to see this and other innovative community 26 development programs continued. 586 1 NPH is concerned that NationsBank will extend 2 the use of their own for-profit CDC to California and 3 with thereby compete for scarce resources and 4 inadvertently undermine local organizations. 5 In addition, the BankAmerica Foundation has 6 been an important source of support for our industry. 7 If this foundation is integrated into the central 8 corporate in North Carolina, our access to these funds 9 will almost certainly diminish. We would like to see a 10 written commitment to contribute a percentage of the 11 bank's earnings to charitable contributions in Northern 12 California. 13 Since most of NPH's members are engaged in 14 producing multi-family housing, we expected to see an 15 increased CRA commitment to multi-family housing as a 16 result of this merger. We note with disappointment that 17 the bank's proposal is not targeted in regards to 18 serving low-income families, nonprofit developers or in 19 regards to offering a flexible mix of financing, 20 including construction, term, bridge, bond programs and 21 tax credit investments. All these goals need to be 22 specific and in writing. 23 The business relationships of our members 24 with Bank of America have developed over many years. We 25 don't want this local presence, nor do we want a huge 26 new bank replacing local staff in making decisions from 587 1 North Carolina or reinventing the wheel when it comes to 2 community lending. Our members have benefited from the 3 lively spirit of competition in community lending which 4 has result in lower cost for loans and more flexible 5 terms. The merger which is proposed will in the long 6 run curtail competition and roll back the gains we have 7 made, therefore, we urge you to consider these issues 8 completely. Thank you. 9 MS. SMITH: Thank you very much. Questions 10 or comments. 11 MR. FRIERSON: Mr. Blasdell, you indiated you 12 are a little unclear on the process. Let me give you a 13 somewhat two-minute summary of we're doing. 14 The Board of Governors has an application 15 before it for NationsBank to acqauire Bank of America. 16 The board is seeking the comments of the public, both in 17 written form and also the comments in this two days of 18 public meetings we've had in San Francisco. 19 All of these comments will be made are part 20 of the record. They will be reviewed by the board, and 21 they will be viewed in light of the statutory factors 22 that the board is required to consider under the Bank 23 Holding Company Act. 24 The focus of a lot of the comments we've 25 received, both written and today and yesterday in public 26 meetings, deal with what we call the convenience in 588 1 needs. The board is required to consider the effect of 2 the proposal on the convenience and needs of the 3 communities to be served. And the information that we 4 receive will be made a part of the record and will be 5 carefully reviewed and taken into account when the board 6 makes its final decision. 7 MS. SMITH: If we don't have any other -- any 8 questions, then we thank you very much for coming this 9 afternoon, and we'll move on to the next panel.
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