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Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Friday, July 10, 1998
Transcript of Panel Twenty-Nine
600 1 MS. SMITH: All right, we are reconvened. This 2 is Panel 28, and we're going to start with Mr. Lawhorne. 3 MR. LAWHORNE: Good afternoon. I am Don Lawhorne, 4 President and CEO of MESBIC Ventures Holding Company, I'm 5 also cofounder and managing director of Pacesetter Growth 6 Fund. These two funds exist in Dallas, Texas to provide 7 equity capital to promising competitive minority-owned 8 firms. 9 In light of time restraints, I have submitted my 10 remarks in writing at my entry to the panel. 11 The strategic and economic realities for the 12 proposed merger of NationsBank and Bank of America are 13 being triggered by global market pressures and perhaps 14 more importantly today's fast growing digital economy. It 15 is well-known today that our nation has entered a new 16 industrial revolution where technology will change how we 17 work, how we shop and how we handle use finance. 18 The digital economy will further fuel consumer 19 expectations for excellent services and competitive 20 products. This will require competitive and extraordinary 21 capacity for the nation's banking system. 22 I am here to support NationsBank/Bank of America 23 merger because it will provide access to larger amounts of 24 equity capital for the nation's most underserved equity 25 market, that is firms owned and led by minority 26 entrepreneurs. . 601 1 NationsBank Texas came into being as a result of 2 an acquisition, one of the state's largest financial 3 institutions. In 1992, it announced an unprecedented goal 4 to provide 10 billion over ten years for community 5 development investing and lending. 6 At the same time, NationsBank selected our firm, 7 MESBIC Ventures, as a national benchmark for providing 8 equity financing and management assistance to create 9 competitive small businesses owned and managed by minority 10 entrepreneurs. After much due diligence, we received an 11 equity commitment of $2 million and had the personal 12 endorsement of Ken Lewis, president of NationsBank. 13 Cathie Bessant, chief investment officer in the Texas 14 executive team. The initial commitment went beyond 15 dollars, they took an active role in our fund by serving 16 on the board of directors, which included Deborah Cannon, 17 a local executive vice president for Nations. 18 NationsBank's financial commitment did not end 19 with just this initial investment. They subsequently, in 20 1997, made a $5 million investment in our second fund, 21 Pacesetter, making it the single largest limited partner. 22 Again, Ken Lewis and the executive team in Texas, Tim 23 Arnoult and Deborah Cannon made this possible. 24 Because of NationsBank's leadership, vision, and 25 unwaivering commitment to our underserved niche, we have 26 provided over $100 million of equity type financing to . 602 1 over 100 minority-owned firms throughout the southwest, 2 particularly Texas and California. 3 Let me illustrate just how important this market 4 is. Several years ago, the Small Business Administration 5 was contacted by the auto makers who had an unusual and 6 unexpected problem. They said by the year 2000 unless -- 7 their smallest supplier had to have sales between two and 8 300 million a year. That would not happen, as it turned 9 out, from minority-owned companies. They would not make 10 the cut. As they studied it further, it was revealed that 11 the reason they wouldn't make the cut is the capital 12 wasn't available to build larger competitive firms. As a 13 result of this, there was numerous efforts done, 14 particularly by Congress leaders, Congressional leaders 15 such as Maxine Waters here in California, along with 16 Esteban Torres here in California and Bill Jefferson in 17 Louisiana, there was an attempt made by them and others to 18 facilitate getting capital to the underserved market. 19 Since 1993, there's been an estimated hundred 20 billion dollars placed in private equity partnerships here 21 in the U.S. The good news is that sounds like plenty of 22 capital. The bad news is less than one percent of that 23 capital went to funds focused on providing equity capital 24 to build larger, more competitive firms owned and led by 25 minority entrepreneurs. Banks play a major part in these 26 partnerships throughout the country. . 603 1 This merger will help address this horribly 2 underserved market. Again, I speak from experience. 3 NationsBank has 20/20 vision when it comes to serving its 4 markets. As I mentioned earlier, barely five years ago 5 they made a $10 billion commitment including low-income 6 housing, small business lending and equity investing to 7 build larger firms in our various communities. The 8 NationsBank/Bank of America pledge for 10 billion -- 350 9 billion over ten years is unprecedented and it will make a 10 difference for that niche. 11 I also want to say a few words about Bank of 12 America. They, too, are a shareholder and I have the 13 personal experience of working with the person to my left 14 who I did not know would be here, Peter Thompson, he has a 15 fund like ours and I wanted to acknowledge that Bank 16 One -- Bank of America helped us as well as has helped 17 Peter. And between the two of us, we felt we create some 18 of the nation's largest minority firms. 19 I submit to you my testimony in writing and urge 20 the support for this merger. Thank you very much. 21 MS. SMITH: Thank you. And we'll go next to 22 Ms. Garland. 23 MS. GARLAND: Good afternoon, my name is Ruth 24 Garland-Dewson. I came here more or less on a personal 25 note. When I read in the Chronicle this morning what was 26 going on down here, I felt I got to go down there and . 604 1 speak for Bank of America. I own Mrs. Dewson's Hats on 2 Fillmore Street and I've been a partner with Bank of 3 America for some 27 years. 4 When the stock market took a dive, I took a dive 5 recently. I went to Bank of America and I tried to get a 6 loan in the traditional manner and I just couldn't get it. 7 So I wrote Mr. David Coulter and I said, "David, my name 8 is Ruth Dewson --" Mr. Coulter, I didn't dare call him 9 David at the time, now I can. I said, "Mr. Coulter I 10 really need this loan, you're obligated to take care of 11 me. I've been with you for 27 years and I really need a 12 loan. And Mr. Coulter took care of that matter. 13 And in each phase of my growth, Bank of America 14 has always been there to support me. I've gone from point 15 A to top ten. Last year I gained national prominence and 16 again I went to Bank of America. They are my partners, 17 they've come through for me, and whether they should merge 18 or not, I don't know. But I know about their credibility 19 and I'm here to tell you that Bank of America is my friend 20 and I know they're going to do the right thing wherever 21 they are. 22 MS. SMITH: Thank you very much. Mr. Funk. 23 MR. FUNK: My name is Joseph Funk, I'm here 24 speaking for Victor Weisser who is President of the 25 California Council for Environmental and Economic Balance. 26 He's asked that I read this letter into the record today. . 605 1 It's addressed to Ms. Joy Hoffman, Community Affairs 2 Officer of the Federal Reserve Bank of San Francisco. 3 Dear Ms. Hoffman, The California Council for 4 Environmental and Economic Balance, CCEEB, is a coalition 5 of California business, labor and public leaders 6 established in 1975 by the late former Governor Edmund G. 7 "Pat" Brown to collaborate on creative approaches to 8 achieve both our environmental and economic goals. We 9 focus on issues such as job creation and economic 10 development, regulatory reform, environmental protection, 11 infrastructure investment and fiscal reform. 12 Everyone should be aware of Bank of America's 13 exemplary internal efforts to lower their own corporate 14 environmental operational impacts. But perhaps what is 15 less well-known is the commitment and leadership the bank 16 has shown in helping Caliornia face up to the broader 17 environmental public policy challenges confronting us. 18 Their landmark efforts in crafting workable proposed 19 solutions to California's most intractable issues, such as 20 land use and sprawl, water and habitat conservation, are 21 nothing less than remarkable. 22 For several years we have worked with Bank of 23 America to help bridge the gap between the environmental 24 and business communities. In these efforts Bank of 25 America has repeatedly demonstrated their commitment and 26 skills in building collaboration between historically . 606 1 adversarial interests. We are proud to have a good 2 working relationship with Bank of America and share the 3 same values. In fact, CCEEB gave special recognition to 4 Bank of America in 1995 by presenting our prestigious 5 Edmund G. "Pat" Brown award to Richard M. Rosenberg, Bank 6 of America's former chairman and CEO, for exemplifying the 7 spirit of environmental and economic balance. 8 Currently, we're pleased that Bank of America's 9 environmental program is actively participating in the 10 California Environmental Dialogue, CED, a collaboration 11 between environmental business and government leaders 12 working to find common ground and workable solutions to 13 thorny challenges in such areas as cost effectively 14 reducing mobile sources of air pollution and demonstrating 15 the linkage between habitat protection and sustainable 16 economic growth. Leaning heavily on Bank of America's 17 past experience and collaboration, we have seen the CED 18 members move from conflict to dialogue to actionable 19 solutions. The bank's leadership role in this work has 20 been key in making the CED successful. 21 We fully expect the merged Bank of America 22 Corporation to continue working in California on our 23 established bridge between the business, government and 24 environmental communities. In fact, I would anticipate an 25 expansion and export of these efforts to other areas as 26 the merged Bank of America Corporation pursues new . 607 1 national partnerships between various stake holders in our 2 environment and economy. I see this merger as an 3 opportunity to leverage Bank of America's leadership role 4 on a national scale and in more geographic locations. 5 CCEEB looks forward to a continued relationship 6 with the new merged Bank of America Corporation. 7 Sincerely, Victor Weisser, President. 8 MS. SMITH: Thank you very much. We'll go next 9 to Mr. Alcasas. 10 MR. ALCASAS: Good afternoon, my name is Gerald 11 Alcasas, I'm the Executive Director for the Nevada 12 Microenterprise Initiative. I appreciate the opportunity 13 to inform this distinguished panel and/or other interested 14 parties by means of personal testimonial on the subject of 15 the proposed merger. Upon completion of this testimony, 16 it is my intention that there is understanding of the past 17 involvement and commitment Bank of America has provided to 18 Microenterprise in Nevada. 19 The Nevada Microenterprise Initiative is a 20 statewide microenterprise organization. In our capacity 21 as a nonprofit organization, we aim to help low- and 22 moderate-income individuals achieve economic 23 self-sufficiency through entrepreneurialship. NMI offers 24 entrepreneurial training, technical assistance and 25 microloans to develop the entrepreneurial skills of our 26 clients. . 608 1 Our training classes focus on what to consider 2 when starting a business as well as the development of a 3 sound business plan. Topics include determining your 4 market, cash flow, bookkeeping and financing your 5 business. We believe this training is key to the success 6 of our clients who, in most cases, have little or no 7 business experience. 8 Our Microloan fund was established in 1993 to 9 fill a gap in access to credit for individuals wishing to 10 start or expand a business. Our clients typically have 11 small loan requests, poor credit or poor or no job history 12 and little, if any, business experience which makes them, 13 in other terms, unbankable. With our nontraditional 14 financing, a client can access up to $7500 for a start-up 15 loan and $25,000 for expansion. Our successfulness in 16 this risky lending is based on our technical assistance 17 programs. We work one-on-one with our clients to assist 18 them with any concerns or challenges they may encounter. 19 This support is critical and crucial to the success of a 20 business and repayment of a loan. 21 Since the creation of the Microloan fund in 1993, 22 Bank of America has played a key role in the establishment 23 and continuation of the program. BankAmerica Foundation 24 was the second contributor to help establish the Microloan 25 fund by giving $15,000. The following year the Bank of 26 America established a $100,000 Micro/MBEWEBE program . 609 1 exclusively for the Nevada Microenterprise Initiative 2 participants. Those who utilized this opportunity are now 3 very successful in their businesses. In 1995, Bank of 4 America matched various programs with grants in the amount 5 of $85,000 and recently committed to 15,000 for NMI 6 operations. 7 Bank of America has also supported NMI through 8 its participation of its employees, opened a second branch 9 in Las Vegas in 1995. Bank of America staff served as 10 founding board members and were instrumental in the 11 creation of the Las Vegas office. Other employees offered 12 assistance to the Nevada Microenterprise Initiative over 13 the years. 14 For the past two years, Ms. Joselyn Cousins, 15 Community Development Officer and who runs the Community 16 Development Department, serves as the president of our 17 board of directors and previously she was on our Loan 18 Review Committee. Her time and dedication to the 19 organization has created many opportunities for our 20 organization. Ms. Cousins has helped to establish a 21 referral system between our organization and Bank of 22 America. Funds have been set aside for individuals who 23 bank with Bank of America and who are unable to be 24 assisted with their lending needs at that time. Those 25 clients are then referred to our training program, they 26 fine-tune their plans, hopefully they become successful . 610 1 and eventually become Bank of America clients once again. 2 As you can see, Bank of America has shown real 3 commitment to the community through its extensive support 4 of the Nevada Microenterprise Initiative. Therefore, we 5 support the merger between Bank of America and 6 NationsBank. Thank you. 7 MS. SMITH: Thank you very much. Mr. Thompson. 8 MR. THOMPSON: Thank you. My name is Peter 9 Thompson and I'm President of Opportunity Capital 10 Corporation and also managing partner of Opportunity 11 Capital Partners. Our companies, similar to Don's, are 12 private equity firms that provide financing to 13 minority-owned companies. And I would just like to take a 14 few minutes to share a few comments with you. 15 Regarding our company's relationship with the 16 bank, a relationship that is noteworthy, in part, because 17 it spans a time period of more than 25 years. And it's a 18 relationship that started back in 1971 when the BofA made 19 its first investment in Opportunity Capital. The 20 investment at that time was critical, not only because of 21 the capital that it provided, but also because other Bay 22 Area companies seemed to regard the bank as a leader in 23 the minority economic development arena and seemed 24 inclined to follow the bank's lead and the bank's example. 25 Ten years later, in 1981, the bank made its 26 second investment and, again, as was the case in 1971, we . 611 1 were able to leverage the bank's involvement with 2 additional investments from other Bay Area companies. 3 Fortunately for us, not only did the bank provide capital 4 and serve as a pacesetter, of sorts, but the bank also 5 invested time in providing guidance in the form of making 6 available to us on a consistent basis senior executives 7 who served as members of our boards of directors and as 8 members of our various advisory committees. 9 This capital and this guidance, as provided by 10 the bank, assisted us in successfully providing capital to 11 a sizable number of minority-owned companies and allowed 12 us to become successful in producing what the investment 13 community, I think, would regard as both respectable and 14 competitive investment results. 15 Rolling the tape on a fast-forward basis over 16 from 1981 to 1992, we realized at that point that the size 17 and shape of our marketplace had evolved to a point where 18 we needed to raise a substantially larger pool of capital 19 in order to remain responsive to the growing needs of our 20 target marketplace. 21 As a consequence, we went back to the bank for a 22 third time, we made a proposal and fortunately the bank 23 responded. And the bank responded with a capital 24 commitment of $15 million. Now, a commitment which we 25 believe was at the time the largest single corporate 26 commitment of capital to a single minority focused venture . 612 1 capital company. And the commitment was for us doubly 2 important because it played a key role in our success in 3 obtaining a similar matching $15 million commitment from a 4 funding source based in Connecticut. 5 The result of these two excursions into the 6 capital market was that we were able to increase our 7 capital base to about $35 million. And those funds were 8 used to provide capital to companies and industries 9 ranging from health care to broadcasting to manufacturing 10 and companies that have provided employment to, oh, more 11 than 2,000 people and companies that have a current 12 combined gross market value of probably over $700 million. 13 Of course, you know, we are proud of these 14 results. But, as importantly, I think it's key to note 15 that accomplishing those results would have been very 16 difficult, if not impossible, had it not been for the 17 continuing willingness of the the bank to provide not only 18 capital but also time over a time period again which spans 19 more than two and a half decades. 20 So just in closing, I'll just say that I 21 appreciate the opportunity to make these comments, and I 22 would be pleased to further discuss them with you at any 23 point. Thanks a lot. 24 MS. SMITH: Thank you very much. Is that Acree? 25 MR. ACREE: Acree. 26 MS. SMITH: Acree. Mr. Acree. . 613 1 MR. MAN: I'm Stephen Acree, the director of 2 Community Development in the City of St. Louis. 3 In 1997, NationsBank acquired Boatmen's Bank 4 which was the oldest and largest banking institution in 5 St. Louis. And Boatmen's had been a leader in the 6 community development field in St. Louis, they had a 7 reputation for pushing the envelope for worthwhile 8 projects. And certainly we in St. Louis at that time were 9 concerned that this very proactive stance would be altered 10 with the NationsBank merger with Boatmen's Bank. 11 In fact, however, NationsBank has assumed a 12 tremendous leadership role in the community particularly 13 in our downtown. Not only has Nations fulfilled the 14 commitment made by Boatmen's but they have brought 15 tremendous additional resources to our community. 16 In the year that NationsBank has been actively 17 involved in St. Louis, it has invested $2.1 million in the 18 St. Louis Equity Fund to provide equity to small housing 19 developers for the creation of low- and moderate-income 20 housing. NationsBank has partnered with my agency in a 21 number of housing developments, including McCormack House, 22 a 100 unit supportive housing development for the elderly 23 where NationsBank provided $6.4 million in low-income 24 housing tax credit equity in affordable housing assistance 25 program contribution dollars. 26 NationsBank also contributed $100,000 to the . 614 1 day-care center at Murphy Park which is a leading edge 2 mixed-income development of a large public housing site in 3 St. Louis. NationsBank also helped to raise $2.4 million 4 in equity for this project. 5 Nations provided 2.5 million in low-income 6 housing tax credit equity for the Etzel Place Apartments 7 which is a 42 unit affordable housing development. And 8 they provided the construction loan and the equity through 9 purchase of tax credits for Parkview Gardens, a 10 not-for-profit development of the Parkview Gardens 11 Neighborhood Association who originally began their 12 efforts under the predecessor Boatmen's Bank. 13 There are a number of very exciting projects that 14 can be accomplished in St. Louis now exclusively because 15 of the addition financial resources and financing tools 16 brought to the community by NationsBank. 17 NationsBank Community Development Corporation is 18 undertaking the $5.3 million acquisition and 19 rehabilitation of an eight story 60,000 square foot 20 warehouse building in our Downtown Loft District. The 21 building is being converted to 26 affordable loft 22 apartments with a first floor art gallery and studio 23 space. The bank CDC will own the project long term in 24 partnership with a local nonprofit, the Regional Housing 25 and Community Development Alliance. NationsBank CDC 26 invested cash equity and purchased the state and federal . 615 1 low-income housing tax credits and the historic rehab tax 2 credits. They will provide the construction financing, a 3 bridge loan and permanent financing, as well. This 4 project does not work financially as a mixed-income 5 development without the NationsBank CDC's ability to 6 invest patient capital. NationsBank is essentially 7 funding 100 percent of the debt and equity for this 8 project, as well as taking a long-term ownership position. 9 They're also pursuing the redevelopment of a 10 140,000 square foot historic warehouse with 42 apartments 11 again in partnership with a not-for-profit Regional 12 Housing and Community Development Alliance. This $9 13 million project will commence in the third quarter of this 14 year. And in the short-term, NationsBank is providing 15 $200,000 to replace the roof and stabilize the building. 16 Our partnership with NationsBank is helping us to 17 create a mixed-income and vibrant residential presence in 18 our downtown that is absolutely critical to re-energize 19 and spur the redevelopment of that area. Their projects 20 and their commitment serve as a catalyst to encourage 21 other corporations and institutions to invest in downtown 22 St. Louis. 23 They've committed to invest $100 million in 24 downtown, and as a part of that commitment, the bank 25 advanced $425,000 to the city to pay for our planning 26 study and they were the first contribution that allowed . 616 1 the team to move forward with the process. They made a 2 $2.5 million loan to the city to acquire a long vacant 3 hotel as part of the city's effort to attract a team to 4 build a state of the art convention headquarters hotel 5 there. 6 They're considering taking a major role in the 7 redevelopment of a historic warehouse group of buildings 8 in downtown St. Louis where Western Hotels has recently 9 announced plans to locate a new property. 10 On the neighborhood level, NationsBank has made a 11 commitment to invest $100 million in low- and 12 moderate-income communities for neighborhood projects such 13 as mortgages, home improvement loans, small business loans 14 and small scale community development lending. 15 In closing, the one thing I was impressed with 16 most when NationsBank began to assemble their staff in 17 July of 1997 was that they hired from the community, from 18 community development professionals, from the former 19 director of Neighborhood Housing Services to the director 20 of the Community Development Program in St. Louis County. 21 It showed their commitment to working with the city on 22 community development. Thank you. 23 MS. SMITH: Thank you very much. Any questions? 24 We don't have any questions for you but we do 25 thank you very much for coming this afternoon to share 26 your views with us and having them become part of the . 617 1 record on this application. So thank you.
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