Public Meeting Regarding NationsBank and BankAmerica
Transcript of Thursday, July 9, 1998
|
Public Meeting Regarding NationsBank and BankAmerica |
1
1
2
3
4
5
6 PUBLIC MEETING
7 NATIONSBANK/BANKAMERICA PROPOSED MERGER
8 ---o0o---
9
10
11
12
13
14 SAN FRANCISCO, CALIFORNIA
15 THURSDAY, JULY 9, 1998
16
17
18
19
20
21
22
23
24
25
26
2
1 July 9, 1998 8:00 a.m.
2
3 P_R_O_C_E_E_D_I_N_G_S
_ _ _ _ _ _ _ _ _ _ _
4 ---o0o---
5 MS. SMITH: Good morning. I think we're ready to
6 start. So let me start by welcoming you to this important
7 meeting on the application of NationsBank Corporation to
8 acquire BankAmerica Corporation. The meeting will last
9 two days. I'll start by introducing myself. I'm Dolores
10 Smith, Director of the Division of Consumer and Community
11 Affairs at the Federal Reserve Board in Washington, D.C.
12 I'll be the presiding officer for this meeting. And our
13 other panelists are, to my left, Bob Frierson who is the
14 Associate Secretary of the board. To my right -- to my
15 immediate right, Ken Binning who is Director for
16 Applications and Financial Analysis in the Division of
17 Banking Supervision from the Federal Reserve Bank of
18 San Francisco. And to his right, Trish Nunley who is
19 Assistant Counsel from the Federal Reserve Bank of
20 Richmond.
21 We are here today because NationsBank Corporation
22 of Charlotte, North Carolina has applied for approval to
23 acquire BankAmerica Corporation San Francisco, California.
24 When the Federal Reserve System considers one of these
25 applications, we look at a number of factors under the
26 Bank Holding Company Act. These include financial issues,
3
1 managerial issues, competitive issues, and the convenience
2 and needs of the communities affected.
3 In doing so, we particularly look at the record
4 of performance of the parties under the Community
5 Reinvestment Act. The Community Reinvestment Act requires
6 the board to take into account an institution's record of
7 meeting the credit needs of an entire community -- of its
8 entire community. The NationsBank application transaction
9 also involves the proposed acquisition or retention of
10 non-banking companies engaged in activities permissible
11 for bank holding companies.
12 The board must determine whether the proposed
13 non-banking activities can reasonably be expected to
14 produce benefits to the public that outweigh possible
15 adverse effects such as undue concentration of resources,
16 decreased or unfair competition, conflicts of interest, or
17 unsound banking practices.
18 The purpose of the public meeting today and
19 tomorrow is to receive information regarding these
20 factors. We will be seeking to elicit this information
21 and to clarify factual issues related to the application.
22 We are very pleased that so many have been
23 willing to come and testify at this public meeting. We
24 will have about 200 groups and individuals represented
25 over the two days.
26 I'd like to talk a little bit about the
4
1 procedures. First of all, this is what is called an
2 informal public meeting. Members of the panel may ask
3 those who are testifying about their testimony. This is
4 not, and I'll repeat not, a formal administrative hearing
5 so we are not bound by rules regarding evidence,
6 cross-examinations and some of the formal trappings of
7 that kind of proceeding.
8 As you can see from the agenda, we need to stick
9 to the schedule very carefully so that everyone who has
10 asked to offer oral testimony will have a chance to say
11 what they would like to say. We are going to ask the
12 witnesses today to be mindful of the needs of others and
13 to help us stay on schedule. The panels have been given a
14 certain period of time and they will be expected to keep
15 within their alloted times. I'll tell you about the
16 signal system. We have two time keepers and they will be
17 giving you signals as witnesses. When you have -- is it
18 two minutes or one minute?
19 TIME KEEPER: One minute.
20 MS. SMITH: When there is one minute remaining to
21 speak and then another signal when the time is up. They
22 will start by holding up a card with that information on
23 it. Sometimes witnesses may not be paying -- or may be
24 engrossed in their testimony and may not notice the card
25 and so what we have is a second signal. If the -- well,
26 the time expired signal. When the time expired signal is
5
1 held up and if the witness doesn't notice it, then we have
2 our second time keeper, Ariel, who is going to give you a
3 musical nudge. It will be very gentle.
4 There may have been some individuals who were
5 unable to sign up in advance, and to the extent possible,
6 we will want to give them a chance to speak, as well. At
7 the end of the meeting today -- tomorrow, not today, at
8 the end of the meeting tomorrow, we will make the mike
9 available to anyone who would like to make a presentation,
10 time permitting.
11 I'll also mention that witnesses may submit a
12 written supplement to their oral testimony by next Friday,
13 July the 17th, and then the record will be closed. Any
14 written supplements should be directed to Jennifer J.
15 Johnson, Secretary of the Board, Board of Governers of the
16 Federal Reserve System, Washington, D.C. 20551. This is
17 information that I think you have already received. But
18 if you need to have it in writing, we will be glad to
19 provide it. The supplements, written supplements, must be
20 received by 5:00 p.m. EDT on July 17th. You may fax your
21 submission to area code (202) 452-3462. Also, if you
22 haven't turned in copies of your written testimony or if
23 you have any other written statements to put into the
24 record, please leave them with the Federal Reserve staff
25 at the registration desk. It is important that we get
26 this information for the record.
6
1 A transcript of the meeting will be available by
2 July the 14th through the Federal Reserve Bank of
3 San Francisco and the board. In addition, the official
4 transcript will be available by close of business on July
5 the 15th on the board's public web site on
6 www.bog.frb.fed.us, technology willing. And with that,
7 we'll begin our proceedings and we will start with a
8 presentation from the applicant.
9 MR. GNAIZDA: Good morning, Ms. Smith. On behalf
10 of 36 of the protestors, we have one procedural matter
11 which we think will help expedite matters and it's a
12 letter that we sent to Chairman Greenspan and the members
13 of the Board of Governers yesterday. And what it relates
14 to is your ability to evaluate who is testifying because,
15 as you will note, the Federal Reserve often lists the
16 number of people speaking for and against. I'd like to
17 present you with the letter.
18 MS. SMITH: I might note, for the record, that
19 Mr. Bob Gnaizda from the Greenlining Institute has passed
20 out a letter to all of us on the panel and to the
21 presenting panel, as well.
22 MR. GNAIZDA: Let me just make one brief comment
23 and then we can get a ruling on this. This letter is
24 entitled Big Bank Bucks Buy Votes. What it relates to is
25 this, that out-of-town people have been prejudiced if they
26 wish to protest at this proceeding, that is, they must pay
7
1 their own way no matter where they live, 3,000 miles away,
2 to come here for three minutes in San Francisco. The
3 parties have raised the issue that the hearing should be
4 across the country. The banks have not supported that.
5 What the banks have done is they have paid the way for
6 those who will support their merger.
7 MR. FRIERSON: Mr. Gnaizda, thank you very much
8 for the letter. We're going to enter this into the
9 record. And we will request, based on the scheduling of
10 the individual panels, you will be given time at the
11 beginning of your panel to make your remarks, but we would
12 like to move on with the schedule that we have. And this
13 letter is part of the record.
14 MR. GNAIZDA: Thank you very much. We just have
15 one procedural matter which you may wish to rule on and
16 this is this. We are not asking that people who the bank
17 paid to testify ought not to testify, they're welcome and
18 we wish to hear them, but they should identify themselves
19 as having received expenses.
20 MS. SMITH: I think I can interrupt right now and
21 say that we will not be asking the witnesses to give that
22 indication. So we will note your objection for the
23 record. And with that, I think we will proceed with our
24 first panel this morning.
25 MR. GNAIZDA: Thank you very much.
26 MS. SMITH: Thank you very much and we'll see you
8
1 later in the day.
2 MR. COULTER: Good morning, Madam Chairmen, my
3 name is David Coulter, with me is Hugh McColl, the CEO of
4 NationsBank. I also want to introduce Don Mullane on my
5 right, Executive Vice President of Corporate Community
6 Development for Bank of America. And Cathy Bessant, on my
7 far left, President of the Community Investment Group at
8 NationsBank.
9 We want to thank the Federal Reserve Board for
10 this opportunity to talk about the proposed creation of
11 America's first coast-to-coast bank.
12 The new BankAmerica will represent the triumph of
13 an idea that began nearly a century ago right here in
14 San Francisco when a local produce merchant named A.P.
15 Giannini founded the Bank of Italy.
16 The Bank of Italy later became the Bank of
17 America and it became a catalyst for economic opportunity,
18 moving capital between communities, funding the rise of
19 major industries and helping to house, feed and move the
20 population of a state that is now the world's seventh
21 largest economy.
22 The story of California is really Bank of
23 America's story. Here are just a few highlights. Through
24 the years and right up until today, Bank of America has
25 purchased the bonds that have built universities, highways
26 and, yes, even the Golden Gate Bridge.
9
1 In 1929 when the City and County of San Francisco
2 ran out of funds to complete the Hetch Hetchy water
3 system, our bank stepped in and bought the bonds. Today
4 that water is in the drinking fountains in this building.
5 We financed farmers and ranchers at a time when no other
6 bank would entertain them. And today California boasts
7 the most fruitful agricultural industry in the world.
8 We helped build Hollywood, too. We lent money
9 for thousands of films ranging from Snow White and the
10 Seven Dwarfs to Gone With the Wind, from Lawrence of
11 Arabia to It's a Wonderful Life. In Hollywood we became
12 known as The Movie Bank.
13 The Dodgers came to Los Angeles with BofA's help.
14 Mattel and Disneyland were built with BofA financing. And
15 we've been there for Silicon Valley, too. From O'Malley
16 to Disney to Jobs, the great visionaries have turned to us
17 to finance their dreams. As have millions of individuals
18 who count on Bank of America when the time comes to
19 purchase their home, educate their children or start their
20 business.
21 I can assure you that Bank of America has brought
22 unparalleled commitment to the communities we serve. The
23 new Bank of America will continue in this manner but on a
24 much larger scale than ever before. In fact, it will be
25 positioned to create economic opportunity nationwide.
26 Long ago Bank of America sought to empower people
10
1 by opening bank branches in hundreds of communities
2 throughout California. Today we're bringing a wide array
3 of financial services even closer to home and making them
4 available to customers 24 hours a day. And we are not
5 turning our backs on the communities that need financial
6 services the most.
7 In South Central Los Angeles, for example, we
8 have more branches than all other banks combined. We've
9 played a principal role in capitalizing one of Los
10 Angeles's three African American owned financial
11 institutions, Founders National Bank. And just last month
12 the CEO of that bank, Carlton Jenkins, said this in a
13 letter to the Federal Reserve Bank in Richmond. Quote,
14 "BankAmerica has been an extremely significant participant
15 in the growth and maturation of Founders National Bank.
16 This, in spite of the fact that several of our branch
17 locations -- in several of our branch locations, we are
18 clearly a competitive institution to them," unquote.
19 The BankAmerica Board of Directors has
20 established a goal that its major operating units receive
21 outstanding ratings for their CRA activities. We are
22 living up to that standard. BankAmerica Corporation has
23 five bank subsidiaries and all five currently hold
24 outstanding Community Reinvestment Act ratings. Two of
25 those have been earned under the new CRA regulations.
26 Our flagship institution, Bank of America
11
1 National Trust & Savings Association, has received four
2 consecutive outstanding ratings. Our Federal Savings Bank
3 is rated outstanding by the Office of Thrift Supervision.
4 Our Community Development Bank is rated outstanding by the
5 FDIC. Bank of America Texas and our Credit Card Bank in
6 Phoenix are rated outstanding by the Office of the
7 Comptroller of the Currency.
8 We believe that allocating the resources and
9 performing at a level to achieve these outstanding ratings
10 is very, very important. We believe it is equally
11 important to reward outstanding banks by placing value on
12 their outstanding ratings at times like this.
13 I know that it's important to you to have
14 financial institutions that are committed to community
15 building. I hope you come away from today's hearing with
16 a better understanding of our commitment. To help in that
17 regard, let's take a brief look at Bank of America's
18 record.
19 We surpassed the ten year $12 billion community
20 lending commitment that was announced by the bank in 1992
21 in four and a half years.
22 Last year, we voluntarily set a new, very well
23 defined ten year goal of $140 billion in community
24 lending. It was an unprecedented move by a major bank,
25 once again on a voluntary basis. Mr. McColl will later
26 speak to an even larger voluntary commitment by the
12
1 BankAmerica.
2 Since 1992, we have booked $2.5 billion in
3 affordable consumer loans to low- and moderate-income
4 borrowers.
5 Underscoring our commitment to neighborhood
6 revitalization is the success of Bank of America's
7 Community Development Bank which has become the west's
8 number one source of government guaranteed small business
9 loans and multi-family affordable housing finance. In the
10 last five years, we have booked nearly $1.5 billion in
11 community related small business loans and approximately
12 $2 billion in credit for multi-family affordable housing,
13 including more than $600 million in the first half of
14 1998.
15 Last year, Bank of America became the first major
16 bank to launch an initiative tailored specifically around
17 the banking needs of rural America. Our rural 2,000
18 Community Development Initiative includes a three year
19 $500 million community development lending goal. It also
20 calls for $5 million in grants that will benefit rural
21 communities and Indian country. Helping us to carry out
22 this initiative are four advisory committees that include
23 42 rural community experts and practitioners.
24 We were the founders of the California Community
25 Reinvestment Corporation which provides permanent
26 financing for multi-family affordable housing and serves
13
1 as the model in the western United States for other bank
2 consortiums. We have invested in dozens of other similar
3 multi-bank organizations.
4 To help create jobs and stimulate economic growth
5 in minority communities, we have invested more than $32
6 million in minority venture capital funds.
7 We continue to expand homeownership opportunities
8 among low-income and minority borrowers through our
9 Neighborhood Advantage program which has generated loans
10 of more than $15 billion since its inception. In 1997,
11 nearly one-fourth of all our mortgage loans were made to
12 minorities and low- and moderate-income borrowers.
13 We've just introduced a new zero downpayment
14 mortgage program for low- and moderate-income borrowers
15 which has had stunning results in our demonstration
16 markets. In fact, we accepted nearly $300 million in
17 applications in just three months.
18 In 1992, we introduced Advantage Business Credit,
19 a lending initiative that has taken much of the paperwork
20 out of small business loan applications for $100,000 or
21 less. In fact, the application for this product is just
22 one page. During the last six years, our so-called ABC
23 program has generated loans of $4.1 billion.
24 And we've trained more than 15,000 of our
25 associates in diversity programs so that they can better
26 respect and cherish the differences that make our company
14
1 and our communities unique. We believe that changing
2 demographics represent new markets and opportunities for
3 us to serve people. Or as my predecessor, Dick Rosenberg,
4 said so often, quote, "Service to low-income communities
5 is the right thing to do and the smart thing to do,"
6 unquote.
7 We're also helping to meet the financial needs of
8 a changing population by delivering ATM service in three
9 languages and staffing many branches with employees who
10 speak Spanish, Japanese, Korean, Chinese or Tagalog.
11 And since 1991, we have helped to strengthen
12 local education, economic development and environmental
13 quality with $206 million in contributions to nonprofit
14 organizations across the western United States.
15 We were the leading advocate for the revised CRA
16 regulations, encouraging banks, regulators and politicians
17 to give the regulations a chance. We recently commented
18 positively to the Federal Reserve on Regulation B which
19 calls for the voluntary collection of race and gender data
20 on small businesses. We've spoken out and taken
21 leadership positions on child care, Proposition 13, urban
22 sprawl, water, Hispanic higher education and other issues
23 important to all of our communities.
24 We've established ourselves as good corporate
25 citizens through an environmental program that has
26 resulted, among other things, debt for nature swaps to
15
1 preserve Latin American rain forests. We were the first
2 major financial institution to sign the CERES Principles,
3 which hold signatories to a strict environmental code of
4 conduct.
5 Throughout the nation, Bank of America's record
6 is one of commitment, commitments made and commitments
7 kept.
8 I think the point is best made in a letter that
9 was forwarded to me a while back by then Comptroller of
10 the Currency Gene Ludwig. The letter was sent to
11 Mr. Ludwig in October of 1997 by the Greenlining
12 Institute's Executive Director and General Counsel who
13 wrote him about our CRA performance. Here's what they
14 said, quote, "The so-called outstanding rating given to
15 almost half of all very large financial institutions is
16 inadequate regarding Bank of America. As we previously
17 discussed, Bank of America is the overall CRA leader. We
18 believe the rating for Bank of America should be
19 outstanding plus," unquote.
20 I hope this helps give you a better understanding
21 of our community commitment.
22 NationsBank has a similar commitment to its
23 communities just as we are both committed to our
24 associates. Hugh McColl will elaborate on this for you
25 during his testimony. I'd like to turn it over to Hugh
26 but first allow me to close with this thought.
16
1 A.P. Giannini once said, "When nationwide branch
2 banking is an accomplished fact, then America will have
3 come of age financially."
4 That's what our merger is all about, it will
5 produce an awesome combination and its power will be
6 unleashed for the benefit of this country.
7 Mr. McColl and I are convinced of this, that is
8 why we shook hand on this deal and that is why we'll
9 become teammates. And now I'd pleased to introduce my
10 colleague at NationsBank, Hugh McColl.
11 MR. McCOLL: Thank you, David. This meeting is
12 about the effects bank mergers have on communities. This
13 subject is close to my heart, as all of you know, my
14 company has been through many mergers over the past 20
15 years.
16 In each, our intention has been to employ more
17 people, win more money, do more business with minority
18 vendors, be more active in the community, and generally
19 make a bigger difference than our predecessor
20 institutions.
21 In fact, in reviewing the effects of these
22 mergers on our communities, we have found almost
23 universally that employment, lending, community
24 development efforts and charitable contributions actually
25 increase. That has been our vision and it will continue
26 to be so with this merger. In San Francisco and in
17
1 Charlotte and throughout our coast-to-coast franchise.
2 Our goal is for the new BankAmerica Corporation
3 to be the best community development bank in this country.
4 So I welcome the opportunity to share with you the values,
5 efforts, and achievements that make NationsBank a positive
6 force in all the communities where we do business.
7 Now, as you know, NationsBank has a strong record
8 of community investment. We have achieved and maintained
9 outstanding CRA ratings. We have been a leader in our
10 local market and we have consistently sought out local
11 community based partners to help us achieve our community
12 development goals.
13 Let's consider some of the results. In 1997
14 alone, our mortgage lending to minority borrowers topped
15 $2.7 billion and our mortgage lending in low-income
16 neighborhoods topped $2.5 billion. NationsBank is the
17 number one bank lender to small businesses in this
18 country.
19 Our total production in 1997 was more than $11
20 billion, $2.3 billion of which was loaned in low-income
21 areas. We're also the number one bank originator of SBA
22 loans in the United States and we have preferred lender
23 status in every state in our franchise.
24 Our investment capabilities are significant and
25 unique with more than $520 million in community
26 development equity investments currently on our books.
18
1 The NationsBank Community Development
2 Corporation, with the help of many local partners, has
3 involved a or re-habbed more than 14,000 units of
4 affordable housing, investing more than $300 million. Our
5 Community Development Corporation is the only bank owned
6 CDC that serves as both a developer of and investor in
7 affordable housing.
8 The NationsBank Small Business Investment
9 Corporation makes equity investments in small and
10 minority-owned companies. Through it, we've invested more
11 than $15 million in small businesses across the country.
12 Finally, we have invested more than $50 million in
13 minority-owned financial institutions and community
14 development financial institutions. These organizations
15 extend our reach to low-income borrowers and provide
16 capital to distressed neighborhoods in ways that no
17 traditional bank can.
18 Now, looking at what we've accomplished is
19 important, but to understand how we'll continue to be
20 successful in the future, we should look at how we've
21 achieved these results.
22 Our approach can be boiled down to three basic
23 principles. One, we build strategical alliances with
24 community based organizations. Two, we believe in a
25 national commitment delivered and differentiated locally.
26 And, three, we believe strongly in accountability.
19
1 Our partners include national organizations as
2 well as hundreds of local community based organizations in
3 cities, towns, and neighborhoods where we do business.
4 These alliances will represent a fundamental way -- the
5 fundamental way that we do business. We seek partnerships
6 for the betterment of neighborhoods.
7 Our purpose in these partnerships is not to
8 compete against community based organizations but, rather,
9 to work with them to improve neighborhoods.
10 Our decentralized management philosophy means
11 that we understand that one size does not fit all
12 communities in need. In other words, associates across
13 the country do not get community development instructions
14 from Charlotte, North Carolina, they get the resources
15 they need and they get a corporate culture that backs them
16 up when they decide what needs to be done.
17 Our commitment to accountability is self-evident.
18 Since 1992, we have provided detailed reporting at the
19 local, state and national level on all of our results.
20 This process ensures that we continue to meet the evolving
21 needs of our communities. Equally important, it provides
22 further opportunities to gain feedback from community
23 groups, civic leaders and the public.
24 Now, let me be perfectly clear about one thing.
25 Our goal has never been simply to meet the requirements of
26 the Community Reinvestment Act. We strive to lead in
20
1 everything we do, and that includes building strong
2 communities. Our commitment to our communities extends
3 throughout the company, to every business line and to
4 every associate throughout our franchise.
5 Beyond our core business activity, which fuels
6 the economy, supports the tax base and provides
7 employment, there are five areas in which NationsBank and
8 its associates are active in supporting our communities.
9 And they are, first, community leadership, an associate
10 volunteerism; second, individual and corporate
11 philanthropy; three, commitment to adversity; and, four,
12 minority business development; and, five, progressive
13 marketing programs and business policies.
14 Now, I'd like to touch on each of these areas
15 briefly. Community leadership and associate volunteerism
16 are important parts of the NationsBank culture. At the
17 corporate level we provide leadership to our communities
18 by putting our financial muscle behind important community
19 projects. By advocating for a stronger CRA and a
20 permanent low-income housing tax credit, and by working
21 with local governments and community organizations to
22 achieve shared goals.
23 We also have a strong culture of associate
24 volunteerism. Associate volunteers receive two hours of
25 paid time of every week to work in the schools. Local
26 councils within the bank identify volunteer opportunities
21
1 for our associates, and our newest program, NationsBank
2 Neighborhoods, offers cash grants in an associate's name
3 to organizations at which the associates volunteer.
4 Now, the next area I mentioned is philanthropy.
5 Simply put, NationsBank is the most generous financial
6 institution in the country and the new BankAmerica will be
7 so by a long shot. Our combined budget this year will
8 exceed $100 million. No one else even comes close.
9 One of the most important aspects of our
10 decision-making process is that we put the control over
11 charitable dollars in the hands of local executives who
12 know best how to serve their communities. This policy has
13 resulted in not just increased giving but more effective
14 giving with dollars going where they are needed the most
15 throughout the franchise.
16 The third area in which we work very hard to
17 strengthen communities is building diversity among our own
18 associates. Our company will stretch from coast to coast
19 and will include the entire sunbelt, the Pacific
20 Northwest, the Midwest and the Mid-Atlantic. Now, while
21 we are unalterably opposed to quotas of any type, we will
22 continue to support affirmative action and we will have
23 one of the most diverse work forces of any large
24 corporation in this country.
25 And it is our intention that our board of
26 directors will be one of the most diverse corporate boards
22
1 in the country. Not at some time in the distant future,
2 but on day one.
3 One of the most important areas of focus in
4 building strong communities is minority business
5 development.
6 NationsBank has been a pioneer and a national
7 leader in creating and sustaining a strong minority
8 business development program. NationsBank was the first
9 financial institution to be recognized by their Minority
10 Supplier Development Council as the corporation of the
11 year. And the first to receive this recognition two years
12 in a row.
13 In 1990, NationsBank set a goal of ten percent
14 for directing discretionary spending to women and
15 minority-owned businesses. Since then, we have averaged
16 more than 15 percent, amounting to more than $470 million
17 spent with women and minority-owned businesses. Once
18 again, our self-imposed goal turned out to be a floor, not
19 a ceiling. And in typical NationsBank fashion, we blew it
20 away.
21 Now, finally, we are supporting our communities
22 through progressive marketing programs and business
23 policies.
24 For example, we have had a formal Hispanic
25 Marketing Program for more than five years in an effort to
26 reach out to this growing segment of our population.
23
1 We've installed bilingual ATMs, hired bilingual
2 tellers and telemarketers and formed partnerships with the
3 National Council of La Raza, the Hispanic Association on
4 Corporate Responsibility and SER-Jobs for Progress, Inc.,
5 as well.
6 Now, throughout these partnerships, we have begun
7 to develop programs and products that will make banking
8 with us easier and more accessible for all members of the
9 Hispanic community.
10 What we want to establish with our customers, all
11 our customers, regardless of race, ethnicity or economic
12 means are strong relationships and that's why we
13 implemented a relationship approach to fees and pricing
14 that minimizes fee increases for as many of our individual
15 deposit account customers as possible.
16 This spring NationsBank broke from the pack to
17 offer pricing benefits to a vast number of customers. We
18 eliminated check card fees for all customers, and fees for
19 a broad array of services associated with our two most
20 popular accounts were eliminated or frozen through the
21 year 2000.
22 Now, we've heard Dave Coulter talk about his
23 company's commitment to building strong communities across
24 the western half of the United States. And you've heard
25 me talk about my company's commitment to doing the same
26 across the NationsBank franchise.
24
1 In fulfilling these commitments, both our
2 companies have a strong record of accessibility and
3 proactive partnerships with local community groups. In
4 fact, since our merger announcement, we've met with
5 hundreds of community organizations to talk about ways we
6 can best work together to improve our neighborhoods and
7 communities.
8 Bringing our companies together will only enhance
9 our ability to deliver on all of our commitments.
10 The company we will create will be the leading
11 American bank of the 21st Century and we will be this
12 country's premiere community development bank, as well.
13 This will benefit all of our constituents.
14 First, our customers will see a new standard for
15 choice, convenience, value and market presence. Second,
16 our associates will realize more opportunities from
17 working at a larger, stronger company. And, third, by
18 investing in our communities, by providing good jobs and
19 creating new ones and by helping to improve the quality of
20 life for customers and associates alike, we will be the
21 model for corporate citizenship.
22 We will build on the best initiatives from both
23 banks, retaining the Bank of America Community Development
24 Bank and NationsBank Community Development Corporation.
25 These vehicles, as well as new initiatives to promote
26 rural development and Indian country lending and
25
1 investment, will be used to rebuild neighborhoods, create
2 jobs and provide access to the financial system as never
3 before.
4 We will keep decision-making in the hands of
5 local bankers and managers who know best how to serve
6 their communities.
7 We will continue to lead locally and nationally
8 and we will deliver on our commitments whatever and
9 wherever they may be.
10 Now, recently we announced a ten year $350
11 billion commitment to community development lending and
12 investing. The commitment targets $180 billion for small
13 business lending. 115 billion for affordable housing, $25
14 billion for economic development and $30 billion for
15 consumer lending. Now, let me underscore, this is a
16 floor, not a ceiling.
17 Furthermore, fulfilling this commitment will not
18 be easy, it will be a stretch. This commitment will push
19 our new company and each of us individually to be even
20 more proactive, more innovative and more creative than
21 we've ever been. We view this as a challenge, and as with
22 all challenges, we are ready and eager to take it on.
23 Both banks have a demonstrated record of working
24 with community partners. Yet, there are those who oppose
25 this merger because we have not signed, quote, unquote,
26 "CRA agreements" and because we have not itemized the
26
1 commitment by market or by product.
2 I understand the passion these organizations have
3 for their specific communities. As I've said, we share
4 common goals. However, their desire to receive the
5 greatest financial support possible for their individual
6 causes should not overshadow the fact that our pledge, the
7 largest of its kind ever, is designed to benefit all of
8 our communities.
9 When we created this commitment, we decided not
10 to itemize the commitment by market or by product. And
11 there's a good reason for this.
12 Because community needs and circumstances are
13 always changing, we believe the best approach is a
14 flexible commitment that establishes goals on a nationwide
15 basis and relies on capacity and demand within each market
16 to determine how goals are met.
17 Our outstanding record of achievement,
18 accountability and public reporting of results
19 demonstrates the CRA agreements and itemized commitments
20 are unnecessary for our company, they are unwarranted,
21 they are burdensome to manage, they divert resources from
22 the areas most in needs and they prevent us and our
23 partners from meeting the changing needs of our
24 communities. In short, they're not in the best interests
25 of underserved neighborhoods.
26 Now, for our part, NationsBank is, and the new
27
1 BankAmerica will be, devoted to building strong, growing,
2 vigorous communities everywhere that we do business.
3 Community development has been a part of both of
4 our cultures and it will be an integral part of our new
5 culture. It's a fundamental part of the way that we do
6 business. It's essential to the future health of our
7 company and perhaps, most important, as Dave said, it's
8 simply the right thing to do.
9 This is what we have always believed, it's what I
10 believe today and I assure you that it is not going to
11 change. Now, we'll be happy to take your questions.
12 MS. SMITH: Thank you. Bob.
13 MR. FRIERSON: Thank you very much. This is a
14 question to the panel, so anyone feel free to respond. I
15 have several. The board is required to consider the
16 effects of this proposal and the convenience and needs of
17 the communities served and this consideration takes into
18 account the records of performance under the Community
19 Reinvestment Act of NationsBank and BankAmerica.
20 In assessing the effects of the proposal on
21 communities, particularly communities in California,
22 should the board rely on NationsBank's record or
23 BankAmerica's record? If the board should rely on
24 NationsBank's record, how does NationsBank intend to
25 ensure that all individuals in all communities will have
26 access to a full range of products that assist in meeting
28
1 credit needs that may differ substantially from community
2 to community? If the board is to rely on BankAmerica's
3 records, which programs -- and I believe I understood you
4 correctly to say you would be retaining BankAmerica's
5 Community Development Bank -- which programs in addition
6 to that would NationsBank expect to continue?
7 MR. McCOLL: Can I answer the last question
8 first? As to the last question, we intend to retain all
9 of what the Bank of America has been doing, including
10 their support through their foundation of local community
11 efforts and Don Mullane can outline all of the aspects of
12 what has been done.
13 We ask that you measure us on both of our
14 records. And what we believe we would do is bring
15 whatever we think is the best of NationsBank's efforts
16 also to California and to the west coast to supplement
17 whatever has been done by the Bank of America. In other
18 words, we think the sum will be greater than the parts.
19 And that's where I am on that.
20 I may have missed one of the questions. Oh, you
21 want to talk about making credit available to all
22 individuals?
23 MR. COULTER: Sure. I will be somewhat
24 repetitive but I would indicate that we are trying to
25 create a new company here. In fact, we refer to it today
26 as the new BankAmerica Corporation, and in that sense,
29
1 we're trying to take the best of what we think are two
2 fine organizations today. We're blending this merger, as
3 indicated, from the establishment of a policy committee
4 with three senior individuals from Bank of America and
5 three senior individuals from NationsBank and we are going
6 to attempt to operate on a nationwide basis. This is the
7 first coast-to-coast franchise.
8 And in that sense, I think we have a clear
9 understanding that to be successful on a nationwide basis
10 size is not the only important criteria. To be successful
11 on a nationwide basis and take advantage of size, you have
12 to demonstrate local market or natural market leadership.
13 And that involves community investment efforts as well as
14 day-to-day business efforts in terms of relating the
15 products and services you provide in a natural market, be
16 it the Bay Area or be it St. Louis or be it Jacksonville,
17 Florida in a way that the market clearly believes that you
18 have the decision-making power to offer the products and
19 services that makes sense in that natural market.
20 MR. McCOLL: I would just like to add one thing.
21 As to the understanding of the difference in the markets,
22 which I think is a fair question, it should be noted that
23 NationsBank operates in 16 states now, four major regions,
24 each of which is different. For instance, the cattle are
25 more important in Texas by some staggering margin than
26 they are in South Carolina where cotton is more important.
30
1 And we have different industries, from aerospace to the
2 furniture industry, just illustratively.
3 And we understand that the needs of the
4 individuals in each market are quite different and we
5 respond. I made the point earlier and I'd like to
6 underline it, that we have local market leadership that
7 makes decisions in the best interests of each individual
8 community.
9 So our response in Southern California may well
10 be quite different from South Carolina, albeit it will be
11 to achieve the same goals, which is support small
12 business, adequate housing at fair values and services
13 available to everyone in the areas where we do business.
14 So it's not something we're unfamiliar with.
15 We have earned our CRA ratings over a broad
16 number of states and broad regions and we have
17 demonstrably performed in facing the differences that are
18 existent in each of these markets and we will continue to
19 do so.
20 Let me say one last thing. We are Americans, we
21 understand what America is about, and it's about all of us
22 here in the room, even the right to disagree with each
23 other. And I just might -- in response to the earlier
24 statement, you need to understand that we support and, in
25 fact, furnish money to a large number of the groups that
26 are here protesting this merger.
31
1 MR. FRIERSON: Let me follow up on the
2 characterization which has been used several times here
3 which is the coast-to-coast banking franchise. This
4 proposal has been characterized as allowing customers that
5 would have access to approximately 5,000 branches and I
6 believe 15,000 automated teller machines. In addition to
7 what you've told us already, can you provide us with any
8 more detail on how it's going to serve the convenience and
9 needs of those residents in communities who may only use
10 the branches and the ATMs that are located within their
11 own communities?
12 MR. McCOLL: Well, we'll try. The first and most
13 important thing that I believe that banks should do is to
14 provide the fuel for the economy, that is, provide credit.
15 Now, that's the first thing we should do.
16 We have a large deposit base, but in addition to
17 that, because of our strong earnings and capital base,
18 we're able to raise money across the world. And we have
19 demonstrated conclusively and can demonstrate empirically
20 that we're net importers of capital into every market in
21 which we operate. And so it starts with that, being a net
22 importer of capital and furnishing it to markets no matter
23 how large they are or how small they are. We start with
24 that and that's because of our strong ability to access
25 the world markets and to bring money into the market that
26 is beyond our deposit base.
32
1 Secondly, because of our company's success, both
2 companies' success, we are able to develop software that
3 drives down cost, not only to us but to the customer, that
4 is it makes the products that are available to the
5 customer work better for them and facilitates the ease in
6 which they do their business. And that isn't a lot
7 different, candidly, from Wal-Mart which is a
8 coast-to-coast company which does the same thing.
9 Dave, you may want to comment further about that.
10 MR. COULTER: I have just a few comments. Even
11 if you're confined to a pretty small local market, I
12 didn't move very far out of the small town I grew up in
13 Port City, Pennsylvania for the first 16 or 17 years of my
14 life. I'd still argue that value and convenience that we
15 can provide are quite important.
16 Maybe you go to your normal -- maybe you go to
17 your branch on a weekly basis. But perhaps as technology
18 changes and the world continues to evolve and you don't
19 have transportation, if you can access your bank via your
20 interactive cable TV, that's of some value to you. If you
21 need information about sending a child to college in
22 another part of the United States and need to be able to
23 move money back and forth to that child, that's of value
24 to you.
25 So I think the basic benefits you laid out at the
26 start of the question are quite important and very
33
1 valuable.
2 In addition to that, it's certainly my experience
3 here in California that it does not take a very small
4 business today to have international, if not global,
5 aspirations to look at this broad pacific rim which we're
6 fortunate to be on one edge of and desire to sell some of
7 its product offshore.
8 Now, we're in a little bit of a disruptive
9 economic period but I think that's a long-term desire and
10 a long-term need. And that's a case where I think the new
11 BankAmerica Corporation can bring a wide range of services
12 in how to do business in offshore markets that appear very
13 foreign and very distant to many small businesses today.
14 And as I said, I think most small businesses have those
15 kinds of aspirations and dreams.
16 MR. McCOLL: I'd like to add one thing. We have
17 about a hundred thousand teammates in our company and Bank
18 of America has approximately the same number of people who
19 are drawing a paycheck, in effect, from the company, so a
20 couple hundred thousand people working.
21 We live in these communities, large and small,
22 and if for no other reason, we all like our communities
23 that we live in and it's in our interests both personally
24 and corporately to support those communities and we're
25 going to do that.
26 Secondly, we are interested in making money. We
34
1 cannot make money if we don't do the things that banks are
2 supposed to do. That is, if we don't lend money. If we
3 do not make service and products available at reasonable
4 prices, they can go somewhere else and we will lose the
5 business. So we are incented to do the right thing and
6 will do so.
7 MR. FRIERSON: I have one last question, I just
8 want to clarify the record. NationsBank has stated that
9 it will -- it intends to expand all aspects of the
10 BankAmerica rural 2000 Community Development Initiative.
11 Will the rural 2000 initiative be extended to all rural
12 communities that would be served by the combined
13 organization if the merger is approved and how will the
14 initiative be expanded?
15 MR. McCOLL: Well, we'll do that where it makes
16 sense. And it will be expanded under -- obviously, under
17 the leadership of the people who thought it up inside our
18 company. But we'll obviously have to bring more people to
19 the -- bring more people to it from our company, that is,
20 added staffing. Because of time zones, because of
21 different types of rural needs. As I said, a rural need
22 in eastern North Carolina or South Georgia is quite
23 different from what it is in Kansas or Iowa or in Southern
24 California or in -- right here in the valley. So it will
25 have to be tailored to be responsive to each region. But,
26 yes, we intend to continue with the outreach.
35
1 MS. SMITH: Thank you very much for your
2 presentation and we will move on to the first panel.
3 MS. ORR-SMITH: Madam Chairman, I'd like to
4 address this letter to Mr. McColl and Mr. Coulter
5 requesting a meeting with some of the protestors to
6 discuss the specific issues raised. Thank you.
7 MS. SMITH: I think the first panel is mostly up
8 but if there's anyone who hasn't made it up. And if you
9 will just introduce yourselves to the audience as you are
10 seated and let's start with the person on the extreme
11 right.
12 MR. MARTIN: Good morning, my name is DeWayne
13 Martin, I'm Chief of Staff for the City of Atlanta,
14 Georgia.
15 MS. BROOKS: Did you want us to introduce
16 ourselves?
17 MS. SMITH: No, please, just continue to speak.
18 MR. MARTIN: Thank you. Members of the panel,
19 I'm DeWayne Martin, Chief of Staff to Mayor Bill Campbell.
20 MS. SMITH: Can you pull the mike closer?
21 MR. MARTIN: Mayor Campbell regrets that he's
22 unable to be here today but I have come on behalf of the
23 City of Atlanta because we believe that the issue before
24 this panel is very important.
25 Seven years ago Atlanta, Georgia was in the same
26 place San Francisco is today, a major merger between
36
1 Georgia's leading bank and North Carolina National Bank
2 was before the country. This merger was the formation of
3 NationsBank.
4 From the onset, NationsBank showed its commitment
5 to corporate leadership. And at that time our city was
6 vying to attract the world's most watched event, the 1996
7 centennial Olympic games. NationsBank stepped to the
8 table from the onset extending a $300 million line of
9 credit to the Atlanta Organizing Committee at a critical
10 juncture in that process.
11 At that point in our nation's history when many
12 corporations were accused of disinterest in the
13 communities in which they lived and do business,
14 NationsBank has shown and continues to show by example
15 that good business still means community responsibility
16 and commitment. Certainly economic development,
17 affordable housing and expanding employment opportunities
18 are all important issues for any city.
19 Through its broad array of financial services,
20 NationsBank has served all levels of Atlanta's community,
21 whether helping small businesses expand or supporting
22 efforts to retain or attract large corporations to our
23 area. NationsBank plays a fundamental role in the
24 economic vitality of our city and our region. This has,
25 in turn, helped create jobs which is extremely important
26 to our city.
37
1 The capacity and positive effect of economic
2 development in Atlanta to develop affordable housing and
3 create jobs can only be enhanced by the combination of
4 resources of NationsBank and the Bank of America.
5 The most visible, in fact, of the NationsBank
6 community commitment in Atlanta is in the neighborhoods of
7 Atlanta through neighborhood development initiatives.
8 During the past five years, the City of Atlanta
9 has worked in partnership with NationsBank to create the
10 availability of affordable housing and reinvigorate
11 Atlanta's once forgotten neighborhoods. And for the first
12 time in over 25 years, Atlanta, Georgia has experienced an
13 increase in housing and in population in the inner city, a
14 trend that reverses a trend in many major cities where
15 populations have decreased over the past 25 years.
16 I will simply touch on three projects which block
17 by block are making a difference and are evidence of
18 Nationsbank's commitment to cities and communities.
19 First, the Historic Development -- Redevelopment
20 Partnership is revitalizing the Martin Luther King
21 District in Atlanta. When completed next year, the
22 district will have 67 new or historically re-habbed houses
23 representing an investment of four and a half million
24 dollars. This project has increased property values in
25 the area and is attracting more homeowners and businesses
26 to the inner city. Additional phases are being planned
38
1 with the help of NationsBank.
2 Another public/private partnership is the $5.9
3 million to replace at Summerhill which includes 70
4 single-family homes constructed along the neighbor
5 traditional designs. In Summerhill, this development has
6 been a catalyst for additional development, continuing
7 development in the inner city.
8 And the park at Lakewood, a $6.8 million project,
9 represents complete overhaul of a multi-family complex.
10 More than 200 units have been provided. An additional $10
11 million of indirect investment is furthering neighborhood
12 and economic development efforts in Atlanta.
13 NationsBank has established itself as a leader in
14 the community because of its commitment to involvement and
15 investment in the crucial parts of our city and across the
16 country through effective public and private partnerships.
17 We've seen that this commitment can make a difference and
18 we believe that it will continue to. Thank you very much.
19 MS. BROOKS: Good morning. My name is Roberta
20 Brooks and I'm Assistant District Director for
21 Congresswoman Barbara Lee representing the 9th District,
22 California. Thank you for providing -- I'm quoting her.
23 Thank you for providing this opportunity to me and my
24 representative, Ms. Roberts Brooks to address the issue of
25 the merger of Bank of America with NationsBank. I very
26 much regret not being here personally to talk with you but
39
1 I only learned about this meeting accidentally and not in
2 time to rearrange my schedule.
3 The first issue I will raise is the regulatory
4 role of the Federal Reserve Board relative to the ability
5 of these two banks to merge. Congress, through the 1956
6 Bank Holding Company Act, gave the Federal Reserve System
7 the responsibility to review such mergers and to
8 specifically consider the likely affects of the
9 acquisition on competition and the convenience and needs
10 of the community to be served. Due to the increasing
11 number of mergers in the 1950s, Congress reinforced the
12 1956 Act by passing the Bank Merger Act in 1960.
13 The Bank Merger Act strengthened the language of
14 the Federal Reserve Board's responsibility. It stated
15 that the Federal Reserve may not approve any merger that
16 could substantially reduce competition. It also was
17 concerned that a merger not create a monopoly unless it
18 finds that the anticompetitive effects of the transaction
19 are outweighed by the transaction's probable beneficial
20 effects regarding the convenience and needs of the
21 community served.
22 The second issue I wish to address is that of the
23 scale of the banks that are merging. The planned merger
24 of BankAmerica with NationsBank would make it the second
25 largest bank in the United States with assets of $580
26 billion. This merger must be placed in the context not of
40
1 a single event but as the first of a series of announced,
2 planned mergers, Citcorp's $72 billion merger with
3 Travelers Corp., and First Chicago Corp's $30 billion deal
4 with Bank One Corp. Another merger with similar
5 significance to California as BankAmerica is that of
6 California Wells Fargo with Norwest Corp. The
7 consolidation of Wells Fargo with Norwest Corp will make
8 it the seventh largest bank in the nation with assets of
9 190 billion.
10 This leads me to my third point. Given the
11 regulatory responsibilities of the Federal Reserve System
12 and the size of the banks under consideration, I would
13 expect, as many of my constituents and colleagues on the
14 House Banking Committee do, that the Federal Reserve would
15 consider this merger with appropriate gravity. One
16 measure of the seriousness of the Federal Reserve would be
17 its willingness -- is its willingness to listen and the
18 respect it will give to the testimony from people who
19 would be affected by such a merger.
20 It was, therefore, suprising to learn that only
21 one session was to be held on a single day in all of
22 California. You have undoubtedly received a great volume
23 of mail on the subject of your willingness to listen. I
24 understand that, as a consequence of the extent of the
25 mail, we the public now have two days instead of the
26 original single day.
41
1 I run the risk of stating the obvious, that a
2 two-day hearing in one part of California on the loss of
3 the largest bank in California is totally inadequate. And
4 with the risk of being rude by being clear, it's
5 unacceptable behavior from a government agency.
6 My colleagues on the House Banking Committee,
7 Congresswoman Lucille Roybal-Allard and Maxine Waters,
8 representing constituents in Southern California share my
9 concern with the negligible time that's being given by the
10 Federal Reserve to the public and to elected
11 representatives to hold the appropriate discourse on this
12 merger. Although, I am pleased that my representative did
13 not have to travel to Los Angeles to voice our concerns, I
14 am dismayed that so serious a matter should be given such
15 short attention.
16 This is a merger that affects the entire nation,
17 just as Microsoft's practices affects the whole nation. I
18 strongly recommend that the Federal Reserve hold hearings
19 in every state in which either BankAmerica or NationsBank
20 has assets of $1 billion or more.
21 I ask that a letter signed by myself,
22 Representative Roybal-Allard and Waters to Hugh McColl,
23 Chairman and CEO of NationsBank, and David Coulter,
24 Chairman and CEO of Bank of America, be accepted as part
25 of my testimony. We will fax that at a later time.
26 So I have one minute left. I need to move on.
42
1 The major concerns that we have are loss of
2 service. There is a great anxiety expressed by our
3 constituents very directly over the steady decline in the
4 last 20 years or so of banking services and the
5 accompanying tariffs for even the smallest services, such
6 as using the ATM. The pattern of less service and more
7 cost is so clear as to make this proposed merger a crisis
8 point. By delegation from Congress, the Federal Reserve
9 System has the responsibility for responding to these
10 concerns. How are you executing this responsibility?
11 Loss of jobs. How many jobs will be lost when
12 Bank of America moves from the Bay Area to North Carolina?
13 Job holders, families and the public need to have an
14 answer to this.
15 Community development and reinvestment, we have
16 heard a strong commitment from the bank with that but we
17 are concerned about it.
18 I don't have time to finish. I'll submit the
19 written testimony but I just want to indicate that we
20 trust that the Federal Reserve does remember its birth in
21 the republic and its true loyalties will be with the
22 people and give time for people to really give their
23 opinions throughout the country. Thank you very much.
24 MS. SMITH: Thank you. Mr. Brown.
25 MR. BROWN: Thank you, I'm Lee Brown, I'm the
26 Mayor of Houston, Texas which is the fourth largest city
43
1 in America and I want to express my appreciation for the
2 opportunity to provide testimony here today.
3 I've been a customer of NationsBank or one of its
4 predecessor banks for several years. Currently I hold
5 several accounts with the bank plus a mortgage loan. But
6 today I want to talk about NationsBank as a corporate
7 citizen in our city. NationsBank has been an excellent
8 corporate citizen, but most important, it has been a
9 partner with our efforts to improve the quality of life
10 for our citizens in Houston.
11 There are staff in Houston led by Joe Mosellino
12 (phonetic) who is the vice-chairman of NationsBank. They
13 have engaged in hundreds of hours of volunteer work. They
14 have supported many major philanthropic endeavors. And
15 often they've taken the lead in those efforts. Joe has
16 been very active in our Houston Chamber of Commerce which
17 is known as the Greater Houston Partnership and, thus,
18 worked very closely with the city on numerous economic
19 development efforts.
20 NationsBank has been a strong supporter of
21 affirmative action for many years. It was Hugh McColl,
22 the CEO of NationsBank, who called the press conference in
23 Washington, D.C. several years ago to champion affirmative
24 action at a time when the issue is being debated on
25 Capitol Hill. I would like to point out that he did not
26 have to do that, but he did it because he believed in what
44
1 our country, America, stands for, equal opportunity for
2 all. And that philosophy is reflected in the culture of
3 the organization.
4 Last year in Houston when this issue was being
5 voted on in our city, NationsBank lenders were out front
6 supporting this cause. And although I wasn't mayor at the
7 time, I'm told that NationsBank or its predecessors have
8 supported community development programs launched by the
9 City of Houston since 1980.
10 The $350 billion commitment announced by
11 NationsBank and BankAmerica is intended to address the
12 major concerns that I, as mayor of my city, and many other
13 mayors across the country have. Concerns such as how can
14 we get more affordable housing in our cities? This
15 commitment has $150 billion for affordable housing.
16 Concerns such as how can we assist small businesses which
17 provides jobs and economic opportunity to our cities? The
18 NationsBank/BankAmerica commitment will provide $180
19 million for small businesses.
20 This commitment, I'm told, and as we heard
21 earlier from Mr. McColl, is a floor, not a ceiling. So we
22 can expect more to happen.
23 During the past few years, the NationsBank has
24 provided a report to communities which documented the
25 progress they made on previous $10 billion commitments.
26 In 1993, NationsBank committed to spending $10 billion
45
1 within ten years to help build urban communities. They
2 exceeded that goal in four years. We expect they will
3 continue this practice with the $350 billion commitment.
4 I've been pleased with what I've observed about
5 NationsBank, pleased both on a personal basis and as a
6 leader of our city. Our cities throughout America need
7 responsible corporate leaders and community development
8 needs strong private sector commitments to make it a
9 reality.
10 And that's why I'm here today, to give support to
11 the proposal by NationsBank Corporation of Charlotte,
12 North Carolina to acquire BankAmerica Corporation of
13 San Francisco, California. And thank you for allowing me
14 the opportunity to speak before you today.
15 MS. SMITH: Thank you.
16 MS. TAVANLAR: Hello, ladies and gentleman, my
17 name is Katrina Tavanlar and I'm representing
18 Congresswoman Lucille Roybal-Allard from the 33rd District
19 of California.
20 As a member of the Banking Committee and Chair of
21 the California Democratic Congressional Delegation, I'm
22 writing to express my concern ith the proposed merger of
23 Bank of America and NationsBank. I'm especially concerned
24 about its impact on lending, investing, employment and
25 other financial services for low-income and minority
26 Californians.
46
1 This merger will no doubt have a greater impact
2 on California than any other state in the country. The
3 relocation of the headquarters of California's largest
4 financial institution to North Carolina particularly
5 concerns me, and the merger activity that has occurred in
6 California to date reinforces this concern.
7 In California alone, more than 80 banks and
8 thrifts have been acquired by other institutions since
9 1996. In 1992, when Bank of America purchased Security
10 Pacific Bank, they closed over 400 branches. In 1996,
11 Wells Fargo closed hundreds of branches throughout the
12 state after purchasing First Interstate Bank. While we
13 cannot fully anticipate the long-term effects of these and
14 future mergers, the obvious and the immediate impact has
15 been fewer branches and escalating bank fees.
16 I commend Bank of America for its prior and
17 current community reinvestment commitments to our
18 California communities.
19 However, I would appreciate receiving details on
20 how this pledge will benefit California's consumers and
21 communities. In requesting this information, I would
22 respectfully point out that these specific requests are
23 not unprecedented and reflect commitments that other
24 California institutions have made in the past. Therefore,
25 I am confident that NationsBank and Bank of America will
26 continue the good faith efforts to meet the needs of our
47
1 California communities.
2 Specifically, I would appreciate your response to
3 the following questions. One, does the bank intend to
4 earmark a portion of the 350 billion to California? Given
5 Bank of America's dominance in California, it's critical
6 that the community reinvestment commitment be California
7 specific and commensurate with the proportion of the
8 bank's deposits and activities originating in the state.
9 How will the institution fulfill regional
10 commitments within California given the geographical,
11 social and ethnic diversity of our communities? What
12 culturally appropriate products and services will be
13 available to consumers considering the various credit,
14 investment and economic development needs of our state's
15 communities?
16 Second, how will the new bank maintain and expand
17 Bank of America's present programs and commitments in
18 California such as the Community Development Bank, Rural
19 2000 Initiative, Economic Development Initiative, the
20 BankAmerica Foundation and affordable housing activities?
21 It is vital that these programs be distinct entities
22 within the merged bank and continue to be based in
23 California, given the tremendous need in our state and the
24 collective expertise Bank of America has acquired in
25 serving our communities.
26 Third, what will be the bank's specific goals on
48
1 the type and amounts of loan for minority or women-owned
2 businesses -- small businesses and home loans?
3 Fourth, how will the new bank minimize branch
4 closings and increase branch openings in regions and
5 communities that are presently underserved by traditional
6 banking institutions.
7 And finally, does the new bank intend to lower or
8 stabilize ATM and bank fees? I am very concerned about
9 rising bank fees and their adverse impact on financially
10 underserved and low-income communities.
11 A dedicated commitment to California is an
12 exciting and challenging opportunity for banks. This
13 merger has the potential to create mutually beneficial
14 outcomes for both consumers and banks, given ever growing
15 entrepreneurial immigrant communities, expanding small
16 business markets and the booming economy.
17 I look forward to working with you to meet these
18 above-mentioned goals and anticipate your prompt reply.
19 Sincerely, Lucille Roybal-Allard, Member of Congress.
20 MS. SMITH: Thank you.
21 MR. LENO: Good morning and thank you very much
22 for your warm welcome. My name is Mark Leno and I'm a
23 member of the Board of Supervisors for the City and County
24 of San Francisco.
25 Since NationsBank announced in April that it
26 would acquire Bank of America, the San Francisco Board of
49
1 Supervisors has been very concerned about the potential
2 decline and community reinvestment that could result from
3 the proposed merger. We, the undersigned, believe that
4 the proposed Bank of America/NationsBank $350 billion
5 community reinvestment commitment should be included in
6 the bank's intermerger application to make it binding on
7 the new bank.
8 Also, we have asked NationsBank/Bank of America
9 to provide specific commitments to California and the
10 San Francisco Bay Area and its small businesses, minority
11 businesses, minority and low-income neighborhoods and
12 nonprofit organizations. We have concern that consumer
13 services, small business lending, low-income housing and
14 charitable giving may all be negatively affected by the
15 NationsBank acquisition.
16 There is cause for concern that the new bank may
17 not be as responsive to the needs of San Francisco and the
18 Bay Area. In general, larger banks mean higher fees,
19 fewer bank branches, fewer product options and fewer
20 banking options for consumers. A Federal Reserve survey
21 of bank fees and interest rates reveals that, on average,
22 large banks charge higher fees than small banks with an
23 average monthly fee on interest-bearing checking accounts
24 of $10.12 at large banks and $6.13 at small banks. By
25 contrast, the average yield on interest-bearing accounts
26 is 1.1 percent at large banks and 1.58 percent at small
50
1 ones.
2 With bank mergers comes the possibility of bank
3 closures. The National Community Reinvestment Coalition
4 has noted that mergers lead to fewer branches in
5 underserved communities. A 1997 Federal Reserve study
6 found that from 1980 through 1995 branches in middle and
7 moderate income neighborhoods increased eight percent
8 while branches in low- and moderate-income neighborhoods
9 decreased 14 percent. The closure of a branch in a
10 low-income neighborhood could reduce lending in the area,
11 and in turn, spur the decline of the neighborhood. In
12 addition, when bank branches close, teller and other bank
13 jobs disappear.
14 Small business lending is also affected by
15 mergers. A study by Federal Reserve economists predict
16 that small business lending will continue to decline in
17 the next three to five years at the rate of 33 percent.
18 This is the same rate of decline as that of the last five
19 years. A February '98 study of the Federal Reserve Bank
20 of San Francisco found subtle discrimination in lending
21 against minority businesses in the Bay Area. If community
22 reinvestment is diminished in the Bay Area, minority
23 businesses will be the first to suffer.
24 A decline in lending to small and minority-owned
25 businesses would also affect the city's ability to meet
26 our welfare-to-work mandate. The city is counting on
51
1 small businesses to play a significant role in providing
2 jobs for those moving from welfare to work. Small
3 businesses are creating more jobs than larger businesses
4 in the Bay Area and, therefore, more opportunities for
5 welfare recipients. King Security, a local small
6 business, was the first to hire welfare-to-work recipients
7 in San Francisco.
8 NationsBank's record of community reinvestment
9 raises additional concerns. For example, Bank of
10 America's level of lending for low-income households in
11 California is 21.3 percent, but NationsBank's level of
12 lending for low-income households in North Carolina is
13 only 6.3 percent compared to an average for all lenders of
14 8.4 percent.
15 There is a litany of additional questions
16 regarding the activities of NationsBank. As of March
17 1998, NationsBank offered one of the most expensive
18 checking accounts in the country. NationsBank was
19 recently fined $7 million by Wall Street regulators for
20 illegally selling high risk mutual funds to unwary, and
21 mostly elderly, investors. NationsBank is in the process
22 of closing 205 branches in Florida since its purchase of
23 Barnett Bank in 1997. State regulators in Texas are
24 examining NationsBank's transfer of almost half of the
25 bank's Dallas deposits to its corporate headquarters in
26 Charlotte, North Carolina in April to determine if the
52
1 transfer was an attempt to circumvent the state's merger
2 rules.
3 Given that California will suffer the most with
4 the acquisition and loss of Bank of America, we believe a
5 major proportion of the $350 billion community
6 reinvestment pledge should be committed to California. To
7 date, we have not received any commitments, and we
8 understand that the bank will not establish specific goals
9 until after the completion of the merger. The bank merger
10 should be -- the bank should be directed to outline
11 specific community reinvestments in their intermerger
12 application. Our communities deserve a stronger show of
13 commitments to the specific needs of the San Francisco Bay
14 Area. The possible loss of Bank of America, a bank with a
15 proven record of community reinvestment would be
16 devastating and specific commitments are necessary.
17 This is cosigned by my colleagues on the board
18 Michael Yaki, Tom Ammiano, Sue Bierman, Amos Brown, Leslie
19 Katz and Jose Medina. I thank you very much.
20 MS. SMITH: Thank you very much. Are there any
21 questions?
22 MR. FRIERSON: I'd like to thank all of the
23 panelists for coming and sharing your views with us this
24 morning.
25 Mr. Leno, I just have one question from you.
26 Could you provide us with a little more detail on this
53
1 February 1998 study showing the subtle discrimination?
2 And you can just provide that to us. We can proceed to
3 track down that stuff.
4 MR. LENO: I certainly will.
5 MR. FRIERSON: Thank you very much.
6 MS. SMITH: Any other questions? Fine. Thank
7 you very much for coming today and we will go on to the
8 next panel. I might mention that this is a very large
9 panel as you will see on the agenda, however, the time
10 allocations have all been made to fit within a 50 minute
11 period.
12 Mr. Gamboa.
13 MR. GAMBOA: Yes, thank you. Before I start, I
14 want to also express my appreciation for you for holding
15 these hearings. And I have a procedural matter I'd like
16 to raise before my timed testimony takes place. I know
17 from reading up about you that you are attempting to do
18 the best job you can in making a determination on this
19 bank merger. And to do that job, I know you want to get
20 as much fair testimony balanced as possible. So I'm going
21 to make a procedural request. I'm not an attorney, so
22 bear with me, please.
23 And the procedural request is, since you're only
24 having one hearing, that limits grassroots community
25 organizations who don't have the resources to come here
26 today to give testimony. I think you should weigh that in
54
1 when you hear from other organizations that are supported
2 by Bank of America who pay their travel. That will give
3 you good information, the kind of information to give a
4 balanced approach to make a decision.
5 The other thing that's critical is information
6 that you should use in determining this merger is there
7 are numerous, I understand, outstanding discrimination
8 complaints against NationsBank. That information and
9 those should be resolved and you should have that
10 information before you make a determination. I think that
11 would be critical information for you in coming to a
12 conclusion. Or a decision.
13 And, also, there is a CRA review being made now.
14 I think that also will provide you with critical
15 information. I don't think any decision should be made
16 until you're able to assess that CRA review of these
17 financial institutions. That kind of information I think
18 would be extremely helpful for you to coming to a fair
19 decision that I know you will come to.
20 MS. SMITH: Thank you for your comments and
21 observations. And then if we may go to your presentation.
22 MR. GAMBOA: Certainly. I agree with Mr. McColl
23 in one statement he made, that this hearing is not about a
24 bank merger. I think it's a little bit more than what he
25 said than community investment. I think it's about what
26 kind of a country we want to be. It's about a fair chance
55
1 for the underserved community, the poor minority, recent
2 immigrants to achieve the dream that most of us here today
3 enjoy, the ownership of a home, and a safe neighborhood
4 with good schools for the children, a chance for
5 employment that provides a fair wage and health insurance
6 for the family. I think that's what we're discussing
7 today.
8 This dream is not being realized for far too many
9 people, far too many people today. We're involved right
10 now in probably the most unprecedented booming economy
11 ever in this country, and yet that economy is not being
12 equally shared across this country.
13 For instance, every day you see in the newspaper,
14 you read the rich are getting richer and the poor are
15 getting poorer. This economy is not being balanced out
16 and spread out evenly. For instance, the national child
17 poverty rate grew BY 26 percent from 1970 to 1997. Entry
18 level wages for male high school graduates fell 28 percent
19 from 1973 to 1998 in real dollars. 80 percent of white
20 families in this country own their own homes. 40 percent
21 of minorities do. 71 million low-income children have no
22 health insurance, yet most of their parents are working.
23 In the richest nation ever in the history of the world,
24 over one million children will not have an adequate meal
25 the day before their parents are made. You may ask what
26 does this have to do with a bank merger? I think it has
56
1 everything to do with a bank merger. In the first place,
2 it's not a merger, it's an acquisition.
3 You heard today Hugh McColl make a commitment of
4 $350 billion, a CRA commitment. Well, I can state that
5 that commitment is hollow. It's hollow because CRA,
6 itself, has -- is weak. CRA does not -- will allow
7 financial institutions to receive outstanding ratings, and
8 have before in the past, that have made zero, and I mean
9 zero, not one loan to an African American family, that's
10 what CRA can do. And the reason that we have requested
11 definitive commitments in that CRA commitment is because
12 the track record of the financial institution is not good.
13 For instance, you heard Hugh McColl speak about
14 the millions of dollars. I was impressed when I sat in
15 that chair right there and when I heard him talk about
16 these millions of dollars. What you did not hear him
17 speak about is the percentage of the billions of dollars
18 they have. That is much more meaningful. We can get
19 swayed when people talk about a million dollars because
20 that's a lot of money to me and to most people in this
21 room. But it's not a lot of money when you look at the
22 amount of money they have.
23 For instance, less than one percent of the total
24 dollar amount of NationsBank loans went to African
25 American owned businesses. Less than two percent of the
26 total dollar amount of the NationsBank business loan went
57
1 to African American owned businesses. Less than two
2 percent of the dollar amount of BofA's home lending
3 dollars went to African American households. And adjusted
4 for differences in population, BofA has a similar report
5 lending record among Latinos and Asian Americans. And
6 neither bank has goals for minority business contracts.
7 That's the kind of record that this financial institution
8 has.
9 What we are asking them to do is not to do any
10 precedent setting but to match the CRA commitments that
11 other good financial institutions have done. Wells Fargo,
12 NationsBank -- Wells Fargo and WaMu, Home Savings, Union
13 Bank, CoAmerica and others have all made specific
14 commitments because they're not afraid to make those kind
15 of commitments because they know they will meet them. But
16 NationsBank is the only large bank and Bank of America who
17 have refused to make these commitments to our community.
18 Why? If they're sincere about making them, they should
19 put them down and put it into the record. I can only
20 guess that they're not sincere about doing it.
21 We have met with CEO of NationsBank and BofA a
22 couple of times and they have said, "We're against
23 quotas." Well, our community is against quotas, too,
24 because quotas have always frozen us out. But every
25 single business organization sets goals. The commitments
26 we're asking are goals, not quotas. It's not any
58
1 different than any part of the working business. You set
2 goals in sales, you set goals in marketing, you set goals
3 in service. We're telling them to set goals in the CRA,
4 it's no different.
5 Lastly, I'll conclude, Dave Coulter said that
6 BofA was The Movie Bank. I guess it should be something
7 to be proud of, I wouldn't be. I think what we're asking
8 for Bank of America and NationsBank to be is a moving
9 bank, moving to reach out to our communities, to make
10 money by providing new services and products and doing
11 good in our community. It will be a win-win solution, a
12 win for them, they'll receive income and profits, and
13 certainly a win for our community, but they cannot do that
14 without creating a work force that matches the diversity
15 of the marketplace they want to reach. Both banks have
16 refused to provide us with the data of their top
17 management.
18 And one other thing, too, is that they talked
19 about their charitable contributions and how they should
20 get lots of credit for their charitable contributions.
21 But if you look at their charitable contributions, they're
22 doing about one-half of what the banks I have previously
23 mentioned in percentages. And if you look at their
24 charitable contributions, I think the total for one of the
25 banks was $77 million, it looks real impressive. But when
26 you look at the income of just a few, a handful of those
59
1 executives who make those decisions, it was $88 million.
2 That's not much of a charitable contribution. Thank you.
3 MR. FISHER: Good morning. I'm Alan Fisher from
4 the California Reinvestment Committee. We're a statewide
5 coalition of more than 190 nonprofits and public agencies
6 that advocate for increased access to banking for
7 low-income communities and communities of color. We've
8 negotiated CRA agreements with all the major California
9 financial institutions over the last decade.
10 I was interested in listening to Mr. McColl talk
11 about some of the fine things that the bank has done.
12 Many of those things has come out of discussions with CRC
13 members and other community organizations, Greenlining, et
14 cetera, that has really moved the bank on. And I think
15 that's one of the worrisome things that I'll get to about
16 the press release that talks about $350 billion. That's
17 preemptive of community discussion.
18 You'll hear CRC members speak on this panel and
19 other panels today representing their community and
20 community development organization because CRA is about
21 local neighborhoods, it's not about 22 states all at one
22 shot, it's about what happens in particular neighborhoods.
23 We have concerns about this, and clearly as you've heard
24 today, the majority of the California Congress people on
25 the Banking Committee, the L.A. City Council, the
26 San Francisco Board of Supervisors and other elected
60
1 officials have, as well.
2 It worries us, not only because it's the sale of
3 a great California bank, because from our point of view
4 it's not a merger, it's an acquisition of Bank of America.
5 But the loss of that headquarters to a bank that's
6 headquartered 3,000 miles away and to a bank that has
7 refused to make a specific CRA commitment to California
8 and its diverse communities, therefore, we oppose this
9 acquisition.
10 More than 300 of our members and other California
11 organizations and individuals joined with us writing in to
12 the Federal Reserve calling for hearings and we are
13 pleased that you are holding hearings in at least this one
14 location of the 22 states. But, again, we call on you to
15 hold hearings throughout California and in the other
16 states affected because CRA is about what happens in local
17 communities.
18 Anyone can see by the amount of response to this
19 hearing that one hearing alone is tokenism. We all know
20 that a hearing itself is not the same as the sort of
21 regulatory oversight that you'll have to have over these
22 22 states. So we hope that this one hearing is not a
23 portent of the level of oversight that there will be.
24 I'm going to try and just hit on a few specific
25 points today and our letter will go into more detail. I
26 mean, our concerns are such that I could probably talk all
61
1 day.
2 I'm not a lawyer, either, I didn't know that John
3 and Bob were going to raise this issue about people
4 traveling here, but I have a somewhat different suggestion
5 in terms of speakers. I know you're going to hear a great
6 many people. In the interest of a clear record, I would
7 recommend the following. That if grantees of either bank
8 testify against the merger, their testimony should be
9 given a plus 2. If grantees of either bank have been paid
10 expenses to testify, they're testimony should receive a
11 minus 2 and so forth.
12 So, again, community reinvestment is about access
13 to banking for neighborhoods. It's about a bank
14 affirmatively meeting the local needs of low-income people
15 and people of color. So we worry when NationsBank
16 preemptively sums up 22 states in a three-page big dollar
17 press release with nice phrases and little substance. It
18 presumes that they know better than the communities about
19 what the needs are.
20 We've met several times with the bank and would
21 sum up the last meeting and the ones before as saying that
22 they say no very nicely. This is particularly worrisome
23 because, as far as we're concerned, California came into
24 this takeover with, one, a 1992 commitment letter from
25 Richard Rosenberg, CEO of Bank of America, that was a very
26 good specific commitment which is still in effect, as far
62
1 as we're concerned, it has no ending date.
2 Secondly, last year Bank of America upped its
3 1992 goal to 140 billion of which the bank has stated that
4 70 billion is for California communities.
5 Thirdly, the commitment for $40 billion -- $40
6 million, all these big numbers, 40 million dollars in 1998
7 charitable contributions of which, from our calculations,
8 roughly 25 million was for California and 25 percent for
9 community economic development and housing development.
10 Bank of America also, as you've heard, has made
11 commitments around the economic development and rural
12 initiatives that were just beginning to be defined and are
13 still being defined. There needs to be a specific CRA
14 commitment by NationsBank to California that addresses the
15 diverse needs of California's communities, retains the
16 Community Development Bank with its mission to build a
17 nonprofit infrastructure and not compete with it, gives
18 clear dollar amounts and objectives for the economic
19 development and rural initiatives, honors the written
20 commitments and practices of BofA and targets those most
21 in need.
22 Your own studies cast doubt on the real value for
23 sharholders and customers in such mega-mergers. From the
24 altitude of $570 billion in assets, will such a monolithic
25 bank even see local neighborhoods? Without a specific
26 measurable commitment, NationsBank can ignore all but the
63
1 most profitable customers. Bigger is not better, as far
2 as we're concerned, and less neighborhoods are affected.
3 We think that this merger will -- this merger, acquisition
4 will decrease competition.
5 After all, this is a bank, as was said before,
6 that has a worse record in 1996 making home loans to
7 African Americans in its home state than Bank of America
8 did in North Carolina.
9 Every major bank merger in California has
10 included a specific commitment since Richard Rosenberg's
11 1992 letter. BofA set a standard that NationsBank is
12 undercutting and obliterating.
13 If the Federal Reserve wants to maintain
14 progress, it must condition any approval on a specific and
15 enforcible commitment. In addition, this bank has a
16 concentration that is extremely worrisome from our point
17 of view. It has almost nine percent of the national
18 market share but it's only in 22 states. In those 22
19 states, it has a one percent market share in almost every
20 state, and we think that's of grave concern in terms of
21 competition and access for those who are, quote,
22 "unprofitable."
23 So, again, thank you for the opportunity to
24 speak.
25 MR. BIVINS: Good morning, my name is George
26 Bivins, I'm the Chairman of the Black Association of
64
1 Los Angeles. We have over 850 African American business
2 owners. Many of those business owners are customers of
3 the Bank of America.
4 Take any statistics compiled by local, state or
5 federal government regarding banking, including the many
6 statistical reports compiled by independent surveys, and
7 you will find African American -- African Americans are
8 consistently benefiting less from banks, S&Ls and thrifts.
9 Government regulators must take action to protect us.
10 My colleagues and I would not be here today if
11 Bank of America and NationsBank were good corporate
12 citizens. The Black Business Association shares the lack
13 of confidence of this merger along with the National Black
14 Business Council and the National Black Chambers of
15 Commerce. These three organizations nationwide represent
16 over 75,000 black businesses nationwide. We are prepared
17 to prove that less than one percent of the dollar value of
18 all business loans lent by these two banks went to African
19 American businesses. What we have here is a clear case of
20 white wealth built on minorities' labor. We have a clear
21 case of white wealth built on minority labor. Regulators
22 hear are plea.
23 The black community demands inclusion, inclusion
24 leads to growth, exclusion leads to poverty for all our
25 communities. Regulators, hear our plea.
26 Less than two percent of the Bank of America and
65
1 NationsBank vendor contracts are awarded to African
2 Americans. Unlike its competitors of Wells Fargo, Union
3 Bank and Sanwa Bank.
4 I will give you an example, a clear example of
5 this. I am in the insurance business and I am the
6 insurance agent for Sanwa Bank which is the fourth largest
7 bank in this state. Bank of America will not even give me
8 an appointment to come in and present my product to them.
9 I have tried for five years. This is a personal
10 experience that I can tell you. And I'm a very good
11 insurance agent, I've been in the business 26 years, I
12 compete with the same insurance agents for business of
13 Bank of America as I did with Sanwa Bank and I beat the
14 price. So what does this tell you? I am just as
15 qualified or even more qualified than some of the vendors
16 that call on Bank of America, but they choose not to even
17 give me an appointment.
18 Inclusion leads to growth, exclusion leads to
19 poverty. Regulators, please hear our plea.
20 They are willing to set goals of any kind. They
21 throw out large numbers such as $350 billion CRA
22 commitment. How do we monitor this? Regulators, hear our
23 plea.
24 There are many pending race discrimination cases
25 which were brought out earlier before the Justice
26 Department. While these cases are waiting to be heard,
66
1 the large number of cases filed would suggest there is a
2 definite problem with the validity of these cases. Some
3 of these cases must be valid. Regulators, hear our plea.
4 Bank of America lost millions of dollars overseas
5 but were bailed out by the IMF but minorities can't get a
6 small business loan. Regulators, please hear our plea.
7 Is this the outline of a good corporate citizen?
8 This is how Bank of America and NationsBank represent
9 themselves to you, but they can't fool us. We have had
10 the opportunity to deal with them on a firsthand basis.
11 This merger brings capitalism to our communities but
12 without capital.
13 During the civil rights movement, we won
14 everything we fought for but we don't have what we need.
15 Regulators, please hear our plea. Thank you very much.
16 MS. ORR-SMITH: Good morning, my name is Gayle
17 Orr-Smith and I'm here representing the San Francisco
18 chapter of National Association of Negro Business and
19 Professional Women.
20 My focus today would be to introduce to Bank of
21 America some data about minority women in business. And I
22 offer this testimony and this information because of the
23 dismal record that NationsBank and Bank of America have
24 with providing loans to minority women business owners.
25 Also, there's a caution in my remarks that, when you
26 target women, you're targeting majority women, white
67
1 women, non-minority women in their outreach for small
2 business loans. When you target minorities, you target
3 minority women, as well. Very often, that segment of the
4 target group is really underrepresented and underfocused
5 on as a target group.
6 Bank of America and Nations have said they don't
7 need specific goals. But I think after hearing some of
8 this data you might agree with me that there should be
9 some targets for this particular segment.
10 One in eight or 13 percent of nearly eight
11 million women owned businesses in the United States is
12 owned by a woman of color. These 1.2 million minority
13 owned firms employ 1.2 million people and generate nearly
14 $200 billion in sales annually. Over one-third or 37
15 percent of minority owned business firms are owned by
16 blacks, roughly 400,000 firms. 35 percent are owned by
17 Hispanic women, roughly 380,000. And 28 percent are owned
18 by women of Asian, American Indian or Alaskan native
19 heritage, 300,000 firms.
20 Between 1987 and 1996, the number of minority
21 owned women firms has increased about 153 percent. It has
22 increased by 206 percent among Hispanic women owned firms,
23 by 138 percent among Asian and other women owned firms,
24 and by 135 percent by black or African American women
25 owned firms.
26 Between 1987 and 1996, employment, that is jobs,
68
1 within these firms, among all minority firms, has
2 increased nearly fourfold or roughly 300 percent. It has
3 grown by 487 percent among Hispanic women owned firms, by
4 319 percent among Asian and other Native American firms
5 and by 70 percent among black women owned firms.
6 Between 1987 and 1986, sales, that is revenues
7 generated, by all minority women owned firms has increased
8 fourfold as well, up to 318 percent. It has jumped by 534
9 percent among Hispanic women owned firms and by 430
10 percent among Asian and others, and 55 percent among black
11 women owned firms. And it will be interesting to know the
12 top ten states for minority businesses, based on the
13 average ranking of the number of firms, employment and
14 sales, are number one, guess, California. Number two,
15 Texas, Florida, New York, Illinois, Virginia, Maryland,
16 New Jersey, Hawaii, and Washington, D.C.
17 Now, just think what the bank could accomplish if
18 it were targeting small business loans to minority
19 business women. This data is provided by the National
20 Foundation of Women Business Owners in Washington, D.C.
21 who extrapolate such data, and this data has been used by
22 many corporations to market and target women owned
23 businesses as a market group because their revenues and
24 their sales and their growth demonstrates that they need
25 this kind of attention. And I think this would be a key
26 opportunity for Bank of America and Nations to look at an
69
1 entirely new market segment and recognize these women as
2 contributing to the national economy.
3 They say that their programs of goal setting
4 doesn't need specifics, they say that their minimum goals
5 and commitments are a floor. Well, I tell you without a
6 clear plan and strategy, a floor can quickly become a
7 ceiling. And if you're looking at local versus national,
8 at least here in California we've had the benefit of
9 working closely with BofA. They've been able to listen
10 and we can work with them. There's still room for growth,
11 but I don't know how much more effective they will be and
12 how effective we'll be talking to North Carolina, so we
13 think local is better.
14 And without clear goals, many things can affect
15 your commitment or the corporate commitment over time,
16 there's erosion as a result of personnel changes. How do
17 we know that McColl and Coulter are going to stay at the
18 helm and, in fact, their legacy or their commitment to
19 minority outreach, as they stated, will, in fact, stay in
20 place when personnel changes occur.
21 And then a leadership philosophy is more than
22 just words, it means that it has to be communicated
23 throughout the organization and enforced and incentives
24 provided within the corporation to ensure that all of the
25 local affiliates and associates of the branch and of the
26 bank adhere to the goals and standards that are set at the
70
1 highest level.
2 Targets and measurable data help us to know where
3 we've been, where we're going and can focus us to be
4 effective in targeting where the greatest need is and the
5 greatest opportunity for economic gain by the banks,
6 themselves. We're seeking a win-win relationship and we
7 believe that targets, established goals with clear
8 strategies where minorities and others can work with the
9 bank to achieve these goals will be the maximum benefit
10 for everybody concerned. Thank you.
11 MS. ADAMS: Members of the Federal Reserve, my
12 name is Stella Addams and I'm the Executive Director of
13 the North Carolina Fair Housing Center and I bring you
14 greetings today on behalf of the people from the woods and
15 the hoods of North Carolina. Our state motto is to be
16 rather than to seem.
17 The people of North Carolina want to be
18 homeowners. The people of North Carolina want to be
19 entrepreneurs and business owners. The people of North
20 Carolina want to be residents in safe and healthy
21 neighborhoods. The people of North Carolina want to
22 reside in communities that are economically and socially
23 integrated. The people of North Carolina want to be
24 catalysts for positive change in their communities.
25 By contrast, NationsBank seems to be a leader in
26 lending to minorities. NationsBank seems to be a leader
71
1 in lending to small minority business people. NationsBank
2 seems to be a leader in community reinvestment.
3 But I can honestly say to you that Nations
4 expansion west has reduced its commitment at home. When
5 NationsBank first merged with C&S/Sovran, it was the
6 number one bank in North Carolina. Now, it is the number
7 five bank in our state. It used to be the best bank in
8 the neighborhood. You ask any native tarheel whose slogan
9 that was and they will readily tell you it was NCNB. But
10 now that it has a focus on being the best bank in the
11 world, our neighborhoods in North Carolina have become
12 insignificant. We are worried about our future with this
13 bank. How long will it be profitable to remain
14 headquartered in a state in which you are not competitive?
15 Nations certainly shows no interest in obtaining
16 greater market share in our state. When we shared our
17 concerns with them about their sixth place placement in
18 small business lending in North Carolina, they had a sort
19 of "What do you expect? We're not the biggest bank in the
20 state" attitude. Well, when I share with their
21 competitors where they're missing the mark, they have a
22 "What can we do together to improve" attitude.
23 NationsBank's commitment to community
24 reinvestment is all smoke and mirrors. This is easy to do
25 when one has no set targets, no set goals. Who then can
26 question whether or not you have done enough? Who then
72
1 can say that you've accomplished anything long standing?
2 I enter into the record a community needs assessment for
3 North Carolina. I expect you to do your job and analyze
4 whether a demand based solution is sufficient to meet this
5 need.
6 I understand that Mr. McColl is a great military
7 straegist and he has certainly carried out his campaign to
8 become the first coast-to-coast bank with a determination
9 and brilliance of Patton, or maybe it's closer to
10 Sherman's march to the sea.
11 He has developed a clear vision and a strategy
12 and a strategic plan of action for every stage of this
13 merger except one and that is the community investment
14 program. Instead of precision planning and targeting to
15 get the biggest bang for the buck, he has opted for a
16 scattershot approach. And I know you all don't know much
17 about shotguns out here. But you're sure to hit something
18 but you are not necessarily going to make an impact.
19 We want a strategic plan of action. We want
20 quantifiable goals and objectives to meet the credit needs
21 of our communities. Here's to the land of the long leaf
22 pine, the summer land where the sun doeth shine, where the
23 wheat grows strong and the strong grow great, here's to
24 down home, the old North State.
25 The people of North Carolina helped its financial
26 institutions grow great through our deposits, our loyalty
73
1 and our visionary banking laws. NationsBank is honor
2 bound to serve the people of North Carolina and the other
3 underserved communities throughout the franchise. We are
4 not unprofitable customers. We ask only for access to
5 capital and the opportunity to prosper and to grow strong.
6 Thank you.
7 MR. LUI: Madam Chair and members of the panel,
8 my name is Earl Lui, I'm a staff attorney with the west
9 coast office of Consumers Union. Consumers Union is the
10 nonprofit publisher of Consumer Reports Magazine and our
11 magazine regularly writes on banking and other financial
12 services issues. Our office has also been involved in CRA
13 activities for over ten year and was a founding member of
14 the California Reinvestment Committee.
15 Our basic concern or position is that the lack of
16 specific commitments with this plan of acquisition and our
17 belief that the Fed cannot accomplish its goal or mission
18 of examining the convenience and needs of local
19 communities without having those specific commitments in
20 place.
21 I disagree with what Mr. McColl said about the
22 problems with creating goals. As others have said
23 already, having goals and targets is a part of any kind of
24 business plan and it should be part of a CRA plan. And
25 without having those agreements and commitments in place,
26 we don't see how the Fed can truly review the impact of
74
1 this acquisition on the local communities in all these
2 states in which you're looking at.
3 And so because of the size of this merger and
4 because of the mergers to come, your actions and decisions
5 and any conditions you place on this acquisition will set
6 a crucial precedent and will really help answer what I
7 think is the critical question here, which is will the
8 Federal Reserve take its role of protecting the public
9 interests seriously or will it simply act as a rubber
10 stamp for mergers, for this merger and all mergers to
11 come?
12 So as part of requiring specific commitments, I
13 think that can be done in a number of ways. And our
14 written testimony has talked about them. But one possible
15 solution to that would be to hold up approval of any
16 merger until this new bank reaches CRA commitments with
17 the CRA groups and community groups in each state in which
18 it does business. We think, again, that more time will
19 allow fruitful negotiations to take place and approval of
20 this merger should not be rushed.
21 I think another way to do that is to simply look
22 at the existing CRA commitments that are out there.
23 Particularly in Bank of America's case, as Alan Fisher of
24 CRC has mentioned, Bank of America has a very specific and
25 detailed CRA commitment. And at the very least, the Fed
26 and its staff should review every component of that
75
1 commitment and question the bank's management about each
2 and every part of it to see whether or not those parts are
3 retained or not and should receive a definite commitment
4 before deciding on approval of this acquisition.
5 Other people have already focused a little bit on
6 some of the lending and investment activities of these two
7 banks. I'm just going to focus briefly on some of the
8 consumer issues that Consumers Union, in particular, are
9 interested in. Our interests has always been in
10 increasing access to banking services for underserved, low
11 and moderate and communities of color. And again, in our
12 observation, these acquisitions and mergers really haven't
13 benefited those communities in which we're most concerned
14 about.
15 And again, there are several ways in which the
16 Fed can put in some conditions and require some kind of
17 commitments in all of these areas before any approval of
18 this merger. I think, at the very least, the board should
19 require the new bank to make a commitment to serving
20 low-income customers with affordable low cost banking
21 services, savings accounts and checking accounts, for
22 example, as well as access, of course, to credit
23 products. But, as you know, with EFT99 and
24 welfare-to-work initiatives, the access to banking
25 services is even more important now than it has been
26 before.
76
1 And again, there should be some kind of
2 commitment about the type of product, the type of account
3 that EFT99 recipients will receive. Obviously, that
4 account should be a low cost account and should be
5 administered through the bank and not through check
6 cashier's or other expensive fringe banking institutions
7 that are out there. And again, no such commitments have
8 yet been made by this new bank.
9 With regard to mergers in general, again, we've
10 seen that the supposed cost savings that the banks incur
11 are not passed on to consumers. And we ask that a portion
12 of the cost savings in this acquisition be dedicated
13 towards increasing access towards banking services for
14 low- and moderate-income consumers. We think a
15 prohibition on new fees or increased fees on products
16 should be instituted. As the Fed's own study and other
17 studies have indicated, fees tend to rise after these
18 kinds of mergers and acquisitions. And again, all those
19 implications need to be looked at by the Fed.
20 There's been no commitment towards branch
21 closures, to retaining the Bank of America's branch
22 closure policy, and no word at all about possibly opening
23 more branches in underserved communities, and again, those
24 are issues that need to be addressed before approval is
25 granted.
26 Finally, I'd like to raise another point which
77
1 concerns the non-banking affiliates and subsidiaries of
2 bank holding companies. NationsBank, for example, has a
3 finance company subsidiary, Nations Credit, as do a number
4 of national banks, and Consumers Union is seriously
5 concerned about some of the activities of these sub prime
6 lenders and their involvement in lending activities that
7 aren't beneficial to low-income people.
8 We think it doesn't make sense for the Fed to
9 regulate a bank that has a CRA commitment and then also
10 ignore that same bank holding company's affiliates who
11 basically engage in anti-CRA lending activities. And that
12 issue, I think, is an important one and needs to be
13 addressed, again, because more and more banks are pursuing
14 the sub prime market and are acquiring these types of
15 predatory lenders.
16 In closing, again, this acquisition sets a
17 precedent, and I agree with the comments that were made
18 before about the need to do it right and to have more
19 hearings and to require specific commitments, and we urge
20 you to seriously consider all our concerns. Thank you.
21 MS. SMITH: Next.
22 MR. SKILLERN: I'm Peter Skillern, I'm Executive
23 Director of the Durham Affordable Housing Coalition in
24 Durham, North Carolina, and Chairman of the Community
25 Reinvestment Association of North Carolina, and I
26 appreciate being here today.
78
1 Benjamin Franklin said, "Our critics are our
2 friends because they point out our weaknesses so that we
3 can improve ourselves." And certainly NationsBank's
4 friends have turned out in force today. I also consider,
5 actually, myself a friend of NationsBank. I'm one of
6 those organizations that Mr. McColl spoke of in helping to
7 pay for some of our community service work. But as
8 friends, I still have a strong disagreement with
9 NationsBank and have come here to express it to you and
10 ask for a remedy.
11 In 1993, NationsBank acquired First Chrysler and
12 the Charlotte Observer ran an article, which I'll submit
13 to the record, describing how NationsBank promised to
14 clean up First Chrysler's lawsuits and also to make sure
15 that NationsBank in the future would, quote, "follow sound
16 lending policies and practices in full compliance with
17 applicable laws and regulations." The Federal Reserve in
18 approving that acquisition agreed.
19 And yet five years later, we still find instances
20 of predatory lending practices. We still find concerns
21 about approving another merger which still does not
22 address this important issue.
23 I applaud the many good things that NationsBank
24 has done in North Carolina from investments in CDFI's to
25 their charitable contributions to the good loans that
26 they've made. And yet I cannot let go of the fact that
79
1 while they're doing well, they're also doing harm.
2 I submit to you a letter from Carlene McNolty,
3 Attorney for the North Carolina Justice and Community
4 Development Research Center who reviewed a 1996
5 NationsCredit loan to Audrey and Kenneth Snipes. And in
6 it she finds that a number of law practices were violated.
7 For example, Nationscredit failed to disclose loan terms,
8 including that it was an adjustable rate mortgage. It
9 packed the loan with fees, including over $5,000 in
10 settlement fees for a $110,000 loan, and thus charged
11 usery rates under North Carolina law. NationsCredit then
12 flipped the loan by increasing the adjustable rate by two
13 points in the first year and then explaining to them that
14 they'd be glad to refinance at a fixed rate, but if they
15 took their business elsewhere, there would be thousands of
16 dollars in prepayment penalties.
17 I introduce into the record the case of Beatrice
18 M. Smith from Atlanta, Georgia who is currently in
19 litigation with NationsBank over predatory lending
20 practices. In her case, the loan terms were not fully
21 disclosed. The loan was packed with high fees, including
22 the sale of credit life insurance, and the loan was
23 flipped six times in six years, once again starting with
24 Chrysler First and the last two times with NationsCredit.
25 The practices had not changed in the changing of the hands
26 of who owned Chrysler first. She's now fighting
80
1 foreclosure by NationsCredit after rejecting an offer to
2 stop a media story on the issue in exchange for having her
3 loans forgiven.
4 I enter into the record the case of Juanita Smith
5 from Atlanta who was charged over $10,000 in credit
6 insurance which was included in an $85,000 loan.
7 I introduce into the record the concerns of a
8 resident from Morrisville, North Carolina regarding the
9 harassment of NationsCredit. In his protest of this
10 merger, Matthew Lee of Inner City Press does a good
11 analysis of Equicredit's lending to minority households
12 compared to NationsBank and Nations Mortgage. Equicredit
13 is now a subsidiary of NationsBank. It, too, is a sub
14 prime lender with high fees and high points.
15 We question and ask how will NationsBank moving
16 forward reach these two markets, the African American
17 minority market and the majority white market fairly and
18 how will it conduct the practices? We request that the
19 Federal Reserve investigate NationsCredit's lending
20 practices and place conditions on the merger to ensure
21 that these practices are ended and not expanded throughout
22 the country.
23 NationsCredit has grown large from it's
24 acquisition of Chrysler First, it's now over $30 billion.
25 And in addition, according to the Security Exchange
26 Commission, NationsBank is a primary lender to Southland
81
1 Associates, Commercial Credit Loans, Moreequity,
2 Incorporated, and American General Finance among other sub
3 prime lenders.
4 The size of NationsBank before the merger makes
5 it an important and dominant player in this parallel
6 banking institutions and it cannot go unquestioned or
7 unregulated by the Federal regulators.
8 I am not yet impressed by Ken Louis' assurances
9 to run NationsCredit right or not at all. Certainly it
10 hasn't taken five years to determine that changes need to
11 be made.
12 I'd like to highlight ten things that we
13 recommend that NationsCredit can do. And I'll submit them
14 as part of the record. But, in general, we want
15 NationsCredit to offer A credit products as well as B and
16 C credits, change the pay and incentive plan of
17 NationsCredit's front line personnel, develop a standard
18 pricing system for risk that provides a range of price
19 over a continuum of risk, develop a loan review process to
20 ensure loans are soundly, fairly and legally underwritten,
21 contract for self-testing for fair housing and consumer
22 protection violations, require the sub prime companies
23 that are financed by NationsBank to meet similar industry
24 standards, provide leadership in calling for legislative
25 and regulatory reforms, have Hugh McColl demonstrate his
26 commitment and leadership to cleaning up the practices and
82
1 image of NationsCredit, provide HMDA data for
2 NationsCredit as a separate lender for the public to
3 better analyze its overall lending practices, and 10, make
4 a good faith effort to review loans and make those whole
5 who have been injured by these illegal loans. Thank you.
6 MS. SMITH: Thank you.
7 MR. WILLIAMS: My name is Kevin Williams, I'm a
8 member of the board of directors of the Greenlining
9 Institute, also a professionally employed Human Rights
10 Officer with the City and County of San Francisco Human
11 Rights Commission. And I am here to speak against the
12 merger.
13 This half trillion dollar merger is very
14 reminiscent of the '50s and the '60s when the freedom
15 fighters were getting off the bus, both black and white,
16 and were being beat. Those protestors had the right to
17 assert the cause of freedom and justice for their people.
18 And as the beatings were occurring, the F.B.I. were
19 present standing back on the sidewalk taking notes.
20 And that has been symbolically what the Federal
21 Reserve Board has done, it has been federal, it has been
22 reserved and we are bored with the diet of discrimination
23 that we continue to endure year after year, hearing after
24 hearing. This is not a hearing, per se, it is a ceremony,
25 we know that. It's a ceremony because we know the merger
26 is going to be approved. The merger was approved, not
83
1 here in this room, but on the golf course. It was
2 approved in some of the social halls where the elite meet,
3 the deal was cut and we are here to say we know the gig is
4 up. We are watching because the diversity of the State of
5 California is in the room, it's watching the decision that
6 you're going to make. We already know. I don't proclaim
7 to be a prophet, but I know the deal has already been cut.
8 You've been cut in and we've been cut out. We already
9 know that. We're here to say that time, our time, should
10 be now. At this time in history, we need some type of
11 assurance that NationsBank and Bank of America will do
12 what is right.
13 You know, right after a meeting of the
14 Greenlining Institute, I walked over to Hugh McColl and he
15 shook my hand and he said, "You know, Mr. Williams, you
16 have been critical of us but, you know, at 63 I can walk
17 away from this a rich man." I say to Hugh McColl, Kevin
18 Williams is richer than both of you because I know the
19 difference between right and wrong.
20 MR. PEEK: Good afternoon, my name is Ronald Peek
21 and -- well, I'm hopefully going to speak loud enough for
22 everybody. I've come to you from Florida.
23 MS. SMITH: It is working.
24 MR. PEEK: I have come to you from Florida with
25 the Concerned Citizens Political Action Committee and we
26 advocate for the cause of black business development in
84
1 the State of Florida.
2 Before I start, I'd just like to ask you all to
3 join us all in Florida in prayer, we're praying for rain.
4 And so we'd appreciate your prayers in that regard.
5 Thank you for the opportunity to testify
6 regarding the concerns of Florida black businesses in
7 terms of this merger application. As NationsBank is the
8 largest bank in the State of Florida, our experience with
9 their lending policies to African American businesses in
10 the State of Florida is important. Florida is
11 historically a state where CRA has yet to come into its
12 own sovereignty. It ranks in the last two percent of all
13 states in terms of all CRA measurements. No bank there is
14 a clear leader in the shift that must occur to bring
15 Florida into parody with at least the mode of the states
16 of the union enjoy.
17 This merger is significant as the largest to date
18 in our country's history. The recent purchase of Barnett
19 Bank by NationsBank gave black businesses the opportunity
20 to open dialogue with NationsBank. This dialogue produced
21 the issues which dictated a trip to San Francisco.
22 The chairman of NationsBank has yet to take a
23 leadership role in negotiations with us to develop a
24 detailed lending commitment plan for the State of Florida
25 concerning black business development. His local manager
26 for CRA in Florida said, "Take whatever they offer or
85
1 leave it." A classic monopolist's response.
2 We would also beg the board to hold an additional
3 hearing in the State of Florida and other states so
4 affected -- those directly affected and unable to come
5 here can voice their concerns to this audience without
6 hardship.
7 Chairman Greenspan has stated in his January,
8 1998, Wall Street address along with President Clinton
9 that access to capital for black businesses is important
10 for overall growth and our general economy. Chairman
11 McColl has stated on many occasions in speeches that we
12 all can find on the internet that access to capital is
13 important to black business development.
14 Our concern is that putting these statements into
15 practice involve dedication of resources. Without such
16 dedication, there is no truth to commitment. The
17 infrastructure in place to deliver loans to African
18 American businesses in Florida, the black business
19 investment corporations has almost matched the total
20 effort of all banks in that state in this regard. It's a
21 good model. NationsBank has played some role in this
22 delivery, though not the role of the vanguard or leader as
23 it claims with intoxicating advertisement.
24 We have evidentiary reports from the Small
25 Business Administration that characterize loans made by
26 all banks to black businesses in the State of Florida
86
1 clearly indicating that NationsBank is a marginal
2 participant in this market or clearly an institution
3 following the status quo.
4 For instance, in 1993, there were no loans SBA
5 guaranteed to black small businesses. In 1994, there were
6 four loans. In 1995, there were four loans. In 1996, 18
7 loans. In 1997, seven loans. In 1998, three loans.
8 These are all fiscal years. This information is all up to
9 June 30th, 1998, from the Small Business Administration,
10 which in the letter to Betsy Cross, the Assistant Director
11 for the Division of Banking, Exhibit 3, Page 1,
12 NationsBank claims that they are using the SBA criteria as
13 a way to target minority businesses for loans. So I
14 thought that this was important.
15 Out of a total of 470 loans since 1993, 36 loans
16 were to black or African American businesses. We don't
17 know what NationsBank is doing anywhere else. In Florida,
18 it's very apparent that they have great strides to make to
19 live up to promises in the claim of leadership efforts in
20 truly understanding the African American business loan
21 delivery service. We would enjoy, as Chairman McColl
22 says, net import capital coming into the black business
23 economy. Thank you.
24 MS. MAR: Good morning. Can you hear me? My
25 name is Darlene Mar and I'm representing the Council of
26 Asian American Business Association. Today I ask about
87
1 this merger and to look at who are the winners and who are
2 the losers. The winners are the shareholders because
3 without -- and then we are -- the community are the
4 losers.
5 McColl says that we're passionate but, you know,
6 you're passionate if it affects your livelihood, your
7 associates, their livelihood and so on.
8 Without a real commitment, without a plan,
9 without targets of culpability, volunteering, then there
10 is no real commitment at all, these are just numbers.
11 The public should be entitled to the information,
12 they're entitled, like shareholders stock reports and
13 portfolios, why are not we entitled to data information?
14 I believe that this is a bank for the people, am I not
15 correct?
16 To talk about CRA and they talk about lending
17 things, like homes and loans to businesses and so on, but
18 who benefits? Who are the winner from that? The banks.
19 Don't they charge interest?
20 You know, it's interesting some of the comments
21 this morning. Coulter said minority business development.
22 How we're talking about vendor contracts. And McColl said
23 the same thing, how they were the leader in the national
24 supplier of the Diversity Council. So today I brought
25 forward -- I had in my backpack the event sponsorship, and
26 these are a big sponsorship, it's in alphabetical order
88
1 starting from AT&T to the United States Postal Service and
2 I cannot find NationsBank on here so I would like to
3 submit that. So if there's a doubt, then there should be
4 some doubt in this merger and in some of the comments
5 they're saying because they don't have documentation
6 probably.
7 Another thing about the contracts, okay, that's
8 one way to get very small business loans. Eugene
9 (unintelligible) said that was a great part of CRA. It
10 wasn't until last year that the bank started to get
11 involved, maybe because they knew there was going to be a
12 merger and they wanted to look good, so to raise the
13 market up and the shareholders are happy and again we're
14 the loser.
15 We'd like, as a community, to be also the winner,
16 so they're talking about, like, the Hispanic community,
17 the African American, but they did not mention the Asian
18 community or, if they did, it was kind of like a
19 (unintelligible).
20 What they want from the Asian community is our
21 market. I like the statements and listened to the
22 statements this morning. We do not understand. We don't
23 understand what? You know, about the merger or what's
24 good for us? They want flexibility. Flexibility, what,
25 to juggle their books around and the numbers? They want
26 this -- small business want to be global. Excuse me? I
89
1 was a White House conference on small business delegate in
2 1995 and they didn't contact us. In fact, at that
3 conference, the minority delegate caucus, they did not
4 contact us or even sponsor the event in a big way.
5 Then I address your question as you asked, they
6 can't distinguish between a national nation bank and
7 California. They've already lumped it in their head it's
8 going to be a national bank that takes care of people but
9 these are not our (unintelligible) lords. If there's a
10 doubt in your mind at all, please stop the merger.
11 To show good corporate responsibility -- in fact,
12 corporate responsibility is interesting, that didn't come
13 about until after the CRA. We all know why the CRA
14 assisted. Maybe now we should have CRA Part II. But like
15 yesterday morning I was invited by WaMu to meet and greet
16 the Asian business community. Yet I got a phone call
17 later that night and my name was submitted and there was
18 a -- what do you call? -- focus group on how to market the
19 community, and guess who that was paid for and sponsored
20 by? Bank of America.
21 So it's not so much the testimony and these nice
22 printed documents they're submitting but the action I wish
23 you to look at and please listen to us. Even though we
24 are passionate, they're a reason why we're there, all
25 right. And as I sit on your side in areas, I've sat also
26 on the Small Business Advisory Commission, the Small
90
1 Business of Northern California, the Small Business
2 Association, and I also listened to the speakers and I
3 tried to look at the whole picture and tried to understand
4 what's really going on. Thank you very much.
5 MR. THAO: Toule Thao, I'm president of the
6 (unintelligible) Association coming from Fresno,
7 California.
8 As I listened to the testimony this morning from
9 Mr. Hugh Coulter and also David McColl, they decide a
10 great achievement from both banks and unfortunately we
11 still have major, major concerns. The CRA commitment, for
12 example, or the lending practice or the low-income housing
13 for the poor and underserved community and inadequate
14 services outreach to minority and the others served.
15 Let me cite you a few example. I travel
16 throughout the nations serving as commissioner member
17 appointed by U.S.D.A. Agricultural Secretary Dan Glickman
18 (phonetic). I listen to hundreds -- thousands -- not
19 thousands -- several, several testimony from different
20 groups, Asian, black, Hispanic, and in it some of the
21 small farmers are dying and one of the reason is because
22 they are not accessible to these banks.
23 I also remember David mentioning great farming
24 finance, et cetera, but let me share with you. I live in
25 the community and I don't believe that Mr. Hugh McColl and
26 David Coulter serve the community because they surely
91
1 don't see what we're struggling through. We are just
2 about to become the majority farmer of this country and
3 yet zero, zero loan was made to a community like ours,
4 Asian, Hispanic and black in our area.
5 I'm here to say a couple more things. I believe
6 that Mr. McColl served as military officer during the war.
7 99.9 percent of our people are war veterans. If no one
8 else understand our struggle, if you do not understand,
9 you have good excuse. But Mr. McColl should understand
10 our struggle. And that is the services provided is not
11 sufficient, it will not be adequate for the minority and
12 the underserved.
13 I'm here to ask you that do not allow this merger
14 to take place until clean, quantifiable plan is acceptable
15 to this community and that this plan will benefit the poor
16 and underserved community in this whole nation. Thank you
17 very much.
18 MS. ABRAMS: Good morning, my name is Leslie
19 Abrams and I will be reading in a statement from Mr. Harry
20 Alford, the President and CEO of the National Black
21 Chamber of Commerce.
22 Despite his objections to the Reserve's decision
23 to hold hearings only in San Francisco, Mr. Alford would
24 have liked to be here. However, the 2,000 members of the
25 National Black Chamber of Commerce are holding their
26 annual convention in Maryland. However, the convention
92
1 will be submitting a resolution expressing its concerns
2 about the merger to the Federal Reserve as early as
3 Friday. In fact, a large percentage of the organization's
4 membership would have testified if hearings had been held
5 in any of the other cities where NationsBank or Bank of
6 America has branches.
7 I will now read Mr. Alford's statement which is
8 entitled National Black Chamber of Commerce Not Convinced
9 About the NationsBank/Bank of America Merger.
10 African Americans, as well as other minorities,
11 have yet to obtain their fair share of the American
12 economic enterprise. One thing is quite certain, power
13 will concede nothing without a demand and we cannot expect
14 progress without certain standards and criteria being
15 established.
16 NationsBank wants to throw out a big number with
17 no mechanisms in place to set the pace, to monitor
18 compliance and ascertain what is good performance or fine
19 corporate responsibility. Thus, it is certain that the
20 minority communities who are presently served by Bank of
21 America will regress in community reinvestment.
22 NationsBank should also answer for the serious
23 amount of discrimination complaints from its work force.
24 The lawsuit filed by NationsBank against the Office of
25 Federal Contract Compliance (Department of Labor) to
26 prevent an audit to investigate this mass of
93
1 discrimination complaints is shocking. Attorney General
2 Janet Reno has also issued warnings to NationsBank about
3 its performance and equal opportunity hiring. Without
4 proper checks and balances, there is no assurance that the
5 performance previously displayed by Bank of America will
6 endure and it will most likely not improve. This is
7 signed by Harry C. Alford, the President and CEO of the
8 National Black Chamber of Commerce.
9 MR. GAMBOA: That concludes our panel one. I
10 want to express our thanks for your patience and
11 tolerance. We did go over a few minutes but you can
12 understand many of these people have traveled thousands of
13 miles on their own, and so I want to thank you for your
14 tolerance. There is one statement that needs to be made
15 that should be part of the record.
16 Hugh McColl and David Coulter should be part of
17 the process required to hear from the community directly.
18 This was so disrespectful for them to give their talk and
19 then to walk out of the room and not be able to hear what
20 the community feels about them. And that should go on the
21 record. Thank you.
22 MS. SMITH: Again, I realize that there are a lot
23 of witnesses who did not have a chance to present their
24 oral remarks and I encourage you to submit your written
25 statements for the record no later than next Friday but as
26 soon as possible. And we thank you for your participation
94
1 today and look forward to receiving your comments. Again,
2 thank you and we'll move on to the next panel.
3 We probably will cut into the break that we had
4 scheduled for 10:35. This next panel will go its alloted
5 time and then we'll just compress the break a little so
6 that we can -- we won't catch up but we will be closer to
7 where we're supposed to be at this point.
8 We have panel three ready to go. If we can start
9 on the right.
10 MR. SANCHEZ: Absolutely, thank you.
11 MS. SMITH: Say your name and organization,
12 please.
13 MR. SANCHEZ: Good morning. My name is Rafael
14 Sanchez and I'm on the board of directors of the United
15 States Hispanic Chamber of Commerce and I'm a small
16 business owner.
17 The United States Hispanic Chamber of Commerce is
18 the leading Hispanic business association in the United
19 States advocating the interest of over one million
20 Hispanic owned businesses and over 250 Hispanic Chambers
21 of Commerce. We have very serious concerns with the
22 proposed Bank of America and NationsBank merger and the
23 impact they may have with your respective businesses and
24 communities.
25 It is our belief that access to capital is the
26 life blood of businesses and that any changes to its
95
1 availability must be closely scrutinized. Past experience
2 has demonstrated that mergers between large financial
3 institutions have resulted in the following: Fewer loans
4 to minorities, the elimination of employment positions,
5 vendor contract bungling, a decline in customer service, a
6 reduction in financial support to community based
7 organizations including local Hispanic Chambers of
8 Commerce.
9 It is distressing to learn from the Greenlining
10 Institute the following statistics in regards to the
11 BofA/Nations merger. This is data that was estimated for
12 1997. That one percent of all contracts were awarded to
13 African Americans, Latinos or Asian Americans. One
14 percent or less of total dollar volume of all business
15 loans were made to African Americans, Latinos or Asian
16 Americans. Less than a quarter of one percent of pretax
17 earnings was contributed to African American, Latino or
18 Asian American nonprofits. Less than three percent of the
19 total dollar volume of conventional home loans were made
20 to African Americans. Less than two percent of the top
21 100 management by salary are African American, Latino or
22 Asian American.
23 While NationsBank has announced a large community
24 reinvestment pledge, they have refused, according to the
25 Greenlining Institute, to establish specific goals making
26 the pledge unmeasurable and unenforcible. This is cause
96
1 for grave concern given their mediocre record as evidenced
2 by the above-mentioned statistics.
3 We would urge careful deliberation given the
4 extraordinary size of the merged banks which would now
5 operate in 22 states, provide banking services to 29
6 million households and would control eight percent of all
7 the deposits in the nation. We are concerned that this
8 merger may be allowed to proceed while largely ignoring
9 the rapidly growing number of minority and women owned
10 businesses. Thank you.
11 (Recess.)
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
97
1 MS. HAWLEY: Presiding officers, members of the
2 panel, concerned public, my name is Tammy Hawley, and I
3 am presenting on behalf of the National Association for
4 the Advancement of Color People, the NAACP, and our
5 national president and chief executive officer, the
6 Honorable Kweisi Mfume.
7 The NAACP appreciates the opportunity to present
8 here today for the public record regarding the proposed
9 acquisition of Bank of America Corporation by NationsBank
10 Corporation. Our testimony is primarily as it relates
11 to our existing relationship with NationsBank.
12 Many of the communities the NAACP serves face
13 critical social and economic problems arising, in part,
14 from the lack of economic growth and lack of economic
15 employment opportunities and other opportunities.
16 The NAACP has worked to level the economic
17 playing field and to bring about economic parody for
18 minority group citizens. It has launched efforts like
19 the fair share program which reviews corporate
20 opportunity investment activity and economic reciprocity
21 initiative which leverages collective economic clout.
22 The NAACP has also established community
23 development resource centers which target specific focal
24 areas and concerns in local communities. The community
25 development resource center, or CDRC operation, seeks to
26 expand on building economic capacity, leveraging
98
1 resources, and pooling capital for affordable housing,
2 consumer lending, economic development, public and
3 private partnerships, and business development outreach.
4 The CDRC centers were established in 1994 as a
5 pallet project through a partnership with NationsBank.
6 Since 1994, NationsBank has made a tremendous commitment
7 and advanced in promoting economic revitalization and
8 community development through investment in the CDRC
9 operation and its efforts. The partnership has caused
10 more than $90 million in loans to be closed in
11 communities traditionally under-served by financial
12 institutions, and service is now being provided through
13 the existing six operating centers primarily focused on
14 consumer and business education, counseling, economic
15 development advocacy, and technical assistance, in the
16 areas of needs assessment, product development,
17 marketing, lending practices, strategic planning, product
18 and service delivery.
19 Regarding the proposed acquisition of Bank of
20 America Corporation by NationsBank, the NAACP is
21 positioning itself as a resource to ensure certain goals
22 are met and matters not overlooked. We are very
23 concerned about consumer protection, competition, and
24 economic expansion.
25 The proposed new bank's commitment to 350
26 billion dollars in community development lending and
99
1 investment over the next ten years is an indication of an
2 expected enhanced delivery of services resulting from the
3 merger. Three hundred fifty billion represents the
4 largest community development commitment ever announced
5 by a financial institution.
6 This is an opportunity for organizations like
7 the NAACP to challenge this bank to bank and an
8 opportunity for the new bank to live up to a bank's
9 charter role as an economic leader in communities.
10 The restoration and maintenance of the economies
11 of under-served communities will require coordinated
12 development strategies, intensive supportive services,
13 and increased access to equity investments and loans for
14 development activities. The 350 billion dollar
15 commitment, with appropriate follow-through, promises to
16 address these matters.
17 It is our understanding that the NAACP will
18 continue to be a viable partner in the efforts to be
19 undertaken by the new bank. This will help to assure
20 representative benefit to the communities the NAACP
21 serves.
22 If a merger is successful, the NAACP will
23 realize an opportunity for the CDRC operation to grow and
24 to expand into other markets as well. The expansion of
25 the CDRC operation will allow for our one-stop approach
26 to technical assistance, real estate and business
100
1 development services, and consumer counseling to reach
2 additional communities across the country.
3 Furthermore, the already existing delivery
4 system of NAACP units, more than 1,700 throughout the
5 country, provides a ready-made infrastructure to ensure
6 an ability for immediate region to communities for the
7 new back to perform on the community development lending
8 and investment commitment.
9 I have one minute, so I'm going to cut through
10 here to say that we also -- we were pleased to see that
11 $180 billion of the 350 billion has been designated for
12 small business lending. Of course, we support the notion
13 that small business development is crucial to the success
14 of state and local economic development programs, but we
15 are looking for assurances that benefit will accrue to
16 the minority business community, and one of the concepts
17 the NAACP is promoting is that of the small business
18 incubator, which we have launched successfully in smaller
19 markets and hoped to see that concept embraced by the new
20 bank if, in fact, it is approved.
21 Finally, regarding the bank's internal
22 structure, we are keenly interested in diversity goals
23 regarding senior management and the governing board of
24 directors. If the merger is approved and as the proposed
25 new bank solidifies its diversity goals, objectives, and
26 policies, the NAACP will continue to be a resource and to
101
1 monitor the financial institution's internal structure
2 involvement.
3 We do believe that the proposed acquisition and
4 merging of resources can enhance access to credit and
5 capital. Improved partnerships with organizations like
6 the NAACP more readily assure success. NAACP will do its
7 part to assure resources are channeled appropriately and
8 to expand on our existing partnership to the benefit of
9 communities nationwide. Thank you.
10 MS. SMITH: And please do feel free -- well,
11 not feel free. Please give us your entire comment so it
12 can be entered into the record.
13 MS. HAWLEY: Certainly.
14 MR. McCLURG: Good morning. I'm Duane McClurg.
15 I'm with Dallas City Homes. And I first have to state
16 that NationsBank didn't pay -- didn't pay my way here,
17 but now, after filling the timber, I wish they had. But
18 it came out of my organization. And I'm here as a client
19 of NationsBank.
20 Dallas City Homes is a community housing
21 development organization. We serve 65 percent or less of
22 median income area residents in Dallas. And over the
23 past eight years, NationsBank has met our capital needs
24 and really been a leader in community development in
25 Dallas. I can appreciate and share the concerns that
26 I've heard here today, but over the years, NationsBank
102
1 has merged with several other organizations, and we have
2 not seen a continuation of their commitment in Dallas to
3 the low-income neighborhoods. We have been very
4 satisfied with their efforts.
5 There are five other major banks in Dallas, and
6 NationsBank has consistently led the way and helped raise
7 the mark for community lending in Dallas. And I think
8 there are some colleagues of mine here from Dallas, and
9 I'm sure you'll hear the same thing from them. Maybe
10 we're just better in Dallas at getting what we want out
11 of banks. I don't know.
12 But we have been pretty satisfied with
13 NationsBank, and I would expect that a merger acquisition
14 with Bank of America to not lessen anything in Dallas.
15 And I encourage you to deal with NationsBank and work
16 with their CDC. They have a CDC that is, to my
17 knowledge, unprecedented in the United States, providing
18 equity and low interest loans. And I think that Bank of
19 America markets could welcome that kind of community
20 development corp.
21 So I am in favor of the merger and would like to
22 see it proceed. Thanks.
23 MS. SMITH: Thank you.
24 MR. SMITH: Good morning. My name is Chris
25 Smith. I'm CEO of William C. Smith & Company. We're
26 located in Washington D.C. We develop, own, and manage
103
1 affordable housing, multi-family housing units.
2 I'm here today to express Smith Company's
3 support for the merger of NationsBank and Bank of America
4 and in that context would like to share our experience
5 with the former mergers and acquisitions of NationsBank
6 in our local community in Washington D.C.
7 We had the opportunity to be the largest
8 borrower of a local bank in Washington D.C. known as
9 American Security Bank. You may be aware of the fact
10 that they were one of the first and foremost innovators
11 and leaders under the CRA Act. And when it was announced
12 that NationsBank would acquire American Security, we were
13 naturally apprehensive and concerned. And, as it turns
14 out, our concerns were unwarranted.
15 NationsBank not only embraced what American
16 Security Bank had done, which was at that time I think
17 probably one of the first in the country, and that was to
18 develop a separate community development lending group
19 within the bank, not just having one loan officer but an
20 entire unit of the bank set out with a mission to lend in
21 under-served areas. And NationsBank not only embraced
22 that concept and maintained it but also enhanced it with
23 their own programs that they'd already developed.
24 Today, as a practitioner, housing developer, I'd
25 like to just share our experience with NationsBank on one
26 particular development. It's located in Washington
104
1 D.C.,in southeast Washington. It's 1,280 apartment
2 units. It's spread out over 54 acres. It's 99 percent
3 African-American. It also included 25,000 square feet of
4 retail space. The property was over 60 percent vacant.
5 There was no lender willing to come in and
6 participate in that large a development. It was a 58
7 million dollar redevelopment. And I think that's one of
8 the key aspects here and why we support the merger.
9 Because what we have found with NationsBank's previous
10 acquisition and mergers is it's given us, the housing
11 provider, the opportunity to participate in larger
12 redevelopments.
13 As we know today, just redeveloping a 100 to
14 200-unit apartment complex unit is not enough. We have
15 to redevelopment entire neighborhoods. And NationsBank
16 did embrace that concept.
17 This property came with three and a half million
18 dollars of city debt. It really was something that no
19 other lender wanted to touch. NationsBank embraced it.
20 They came in and provided the construction financing.
21 They provided the financing to demolish over 400 units.
22 They've provided the construction financing to build 210
23 for sale town homes.
24 And probably the crown jewel of this entire
25 development is the community needed something to bring
26 and galvanize the community, and that is what we call our
105
1 community town hall education, arts, and recreation
2 center. It's a 51,000 square foot facility. It cost $7
3 million. NationsBank was the first-end funder and they
4 donated over $300,000. They, along with Fannie Mae and
5 the Smith Company, we raised a million dollars. To date,
6 we have raised $5 million and we're two million short of
7 that seven million dollar goal.
8 At our affordable housing -- at our town house
9 development, we operate our own home buyers club.
10 NationsBank has been very innovative. Part two, home
11 buyer counselors meeting with first-time home buyers,
12 many of who are existing residents. Many of our
13 residents having lack of credit available to them have 23
14 percent interest rate loans on their cars. NationsBank
15 has been willing to refinance those cars under their used
16 car program at ten and 11 percent.
17 So we have found with NationsBank to be
18 extremely comprehensive and far reaching in their
19 programs to touch. And the area that we work in day in
20 and day out is in the inner city.
21 And one last note and example is that our retail
22 center, which is primarily made up of fast food and
23 liquor stores, we wanted to reposition it. And
24 repositioning it, we thought that we wanted to see a
25 national franchise come in. NationsBank enabled two
26 local African-American entrepreneurs to purchase an
106
1 Athlete's Foot franchise and open up there.
2 So I'll see my time is up and I'll conclude with
3 that. Thank you very much.
4 MS. SMITH: Thank you.
5 MR. MACK: I'm Johnny Mack. I'm the president
6 and chief executive officer of the National Institute for
7 community empowerment. And I'd like to thank the panel
8 for the opportunity of being a witness this morning.
9 The National Institute for Community Empowerment
10 is an organization that was launched by the Martin Luther
11 King, Jr. Center for Nonviolent Social Change. As
12 President of the National Institute for Community
13 Empowerment, I am pleased to testify today in favor of
14 the proposal by NationsBank Corporation in Charlotte,
15 North Carolina to merge with Bank of America Corporation,
16 San Francisco, California.
17 For over seven years, I've had the pleasure to
18 work with NationsBank officials in connection with
19 community development activities. My first occasion was
20 as a senior official of the Martin Luther King, Jr.
21 Center. In 1990, the King Center established the
22 community empowerment initiative, a program to assist low
23 wealth communities in building social capital, assets,
24 jobs, and overall community wealth.
25 Over a six-year period, this program assisted
26 communities across the country, using the philosophy and
107
1 principals of nonviolent social change, as espoused by
2 Dr. Martin Luther King, Jr. Funding for the program was
3 provided in large measure from federal special purpose
4 grants and contracts administered by the U.S. Department
5 of Housing and Urban Development. In addition, several
6 corporations provided funding in support of our programs,
7 most significant among them NationsBank.
8 Along with its financial support, NationsBank
9 was represented on our advisory committee composed of
10 leaders from the community, public, and private sectors,
11 further demonstrating their commitment. The NationsBank
12 representative was a senior level official from its
13 community investment unit. Working with other national
14 leaders, this representative gave valuable counsel and
15 direction to the program. From its very beginning
16 through the end of the program, NationsBank consistently
17 provided these resources, particularly during times when
18 the need was most critical.
19 My second occasion to work with NationsBank
20 immediately followed the first. In July 1997, the King
21 Center launched the Community Empowerment Initiative
22 Program as a separate independent nonprofit organization,
23 the National Institute for Community Empowerment. During
24 this time, I served as the chief administrative officer
25 of the King Center and had the pleasure of working with
26 another NationsBank senior vice president. This
108
1 representative gave considerable attention as an advisory
2 committee member and through financial support provided
3 by NationsBank in creating the new organization.
4 Consistent with the standard set under the
5 Community Empowerment Initiative Program, NationsBank is
6 giving senior level participation on our board of
7 trustees, as well as funding critical to our operations.
8 And, once again, NationsBank is taking the lead among
9 corporate sponsors. A NationsBank representative serves
10 on our board.
11 The importance of the relationship NICE and
12 NationsBank have established is articulated in the
13 following quote of Dr. Martin Luther King, Jr.: "It
14 evokes happy memories to recall that our victories in the
15 past decades were won with a broad coalition of
16 organizations representing a wide variety of interests.
17 But we deceive ourselves if we envision the same
18 combination attacking structural changes in this
19 society. It did not come together for such a program and
20 will not resemble it."
21 This quote is taken from Dr. Kings' 1967 book
22 "Where Do We Go From Here? Chaos or Community."
23 In contemplating a general plan for the future,
24 Dr. King realized that a different coalition of
25 organizations and new strategies to overcome the
26 seemingly and practical barriers of urban centers would
109
1 be necessary. He saw that new coalitions and strategies
2 must augment the alliances of the civil rights movement.
3 Since his assassination, new forms of community
4 based and community serving organizations are emerging.
5 Until recently, however, these organizations have dabbled
6 at the fringes or are completely unaware of the power
7 that the philosophy and principals of nonviolent social
8 change bring to the field of community empowerment, yet
9 the gravity of this -- the gravity of its importance has
10 not escaped the careful attention of NationsBank.
11 As the organization established by Mrs. Cretta
12 Scott King and launched by the Martin Luther King, Jr.
13 Center for nonviolent social change to carry on the work
14 of community empowerment, the National Institute for
15 Community Empowerment is pleased to share in this
16 alliance with NationsBank.
17 Commenting on the launch of NICE, Dexter Scott
18 King, the president of the King Center, said,
19 "Establishing NICE is the natural progression of a
20 program started more than six years ago under the
21 leadership of my mother."
22 NationsBank has demonstrated by example their
23 commitment to the work of community empowerment through
24 public private partnerships and the cause of nonviolent
25 social change that Dr. King, Mrs. King, and now their son
26 support.
110
1 I believe NationsBank Corporation and Bank of
2 America Corporation are the industry leaders in this
3 field. Their complimentary geographic service areas
4 provide a national scope and services in a manner that,
5 as a whole, is greater than the sum of its parts.
6 I conclude, therefore, that the two banks
7 combined would bring an exceptional commitment to lending
8 investment and service, and I urge that you support the
9 proposal. Thank you.
10 MS. SMITH: Thank you.
11 MS. DOMINGUEZ: Good morning. My name is
12 Augusto Dominguez. I'm president of Greater Miami
13 Neighborhoods. We are a nonprofit affordable housing
14 developer in Miami County, Florida.
15 Our association with NationsBank and some of the
16 banks that it has merged with before, including Barnett
17 Bank, dates back to 1985 when we were established by the
18 enterprise foundation in Miami with a mission of
19 developing affordable housing for very low and low-income
20 persons.
21 Since then, we have developed over 4,000 units
22 of affordable housing. Our median income for home
23 ownership units, which are over a thousand of those, is
24 38 percent of the median income. Our median income for
25 our rental units is about 42 percent.
26 We have enjoyed the support from the bank, both
111
1 Nations, Barnett before them, to the tune of over $20
2 million in financing, both in equity and loans. Our
3 developments are mostly in very low-income areas. We're
4 not suburban developers. We're inner city developers.
5 And one of the things that it's typical of inner city
6 development is that you don't do big deals, that you do
7 small deals that usually banks and other financial
8 institutions or financial players are reluctant to enter
9 into.
10 And we have projects that are as low as 20
11 units, using low-income housing tax credits. And those
12 of you who know what that takes in transaction costs can
13 imagine how difficult those small projects are to put
14 together.
15 However, while we've been able to compete in the
16 state allocation of credits, mostly because banks like
17 Nations and Barnett have been able to turn around
18 commitment letters in as short a period of time as 48
19 hours with full underwriting. The commitment of the
20 staff has just been outstanding on our behalf.
21 After the Barnett/Nations merger in Florida,
22 Nations has re-doubled their efforts in commitments to
23 our organization and other number of groups that we've
24 worked with. And we're working on a number of
25 initiatives that I believe wouldn't have been possible if
26 the banks had remained separate and smaller. Because
112
1 these are very large commitments, and they're very
2 innovative. There are things like a small building
3 rentals, which nobody finances in this country. I'm
4 talking about from duplexes to 15 or 20 units, which our
5 inner city neighborhoods are plagued with and nobody
6 touches because there is not sufficient mechanism. We're
7 working on a mechanism to be able to take care of those.
8 We're also working on innovative mechanisms to
9 be able to acquire larger properties, especially with
10 mark to market coming down the pike to be able to
11 preserve the affordability of those project based Section
12 8 units that are in danger of being lost. And we're
13 talking about a very large equity commitment that the
14 bank is willing to hold until we can flip those projects
15 with 501C3 bonds.
16 Again, I don't believe that smaller banks can
17 afford to do those kinds of things, and I would urge you
18 to approve the merger. In hearing some of the testimony
19 this morning, I think creating goals and on specific
20 targets is perfectly fine, but I think there are many
21 more advantages to the merger than disadvantages at this
22 point. And I thank you.
23 MS. SMITH: Thank you.
24 Thank you very much for coming today and look
25 forward to having you submit any written comments that
26 you wish for the record. And with that, we're going to
113
1 take a short break, I'd say about ten minutes, and then
2 we will -- let's make it as close to 10:50 as possible so
3 that we can get back on schedule.
4 (Whereupon a short recess was taken.)
5 MR. MOSLEY: First of all, I'd like to thank
6 the Federal Reserve for allowing me to come and submit
7 testimony on behalf of Congresswoman Maxine Waters who
8 would have loved to be here. However, other business has
9 taken her away. I'd like to read her statement into the
10 record if I might. Once again, my name is Kevin Mosley
11 and I represent Maxine Waters, chair of the Congressional
12 Black Caucus.
13 "Good morning. As a member of congress
14 representing the 35th Congressional District and as the
15 chair of the 39-member Congressional Black Caucus, I am
16 pleased to have the opportunity to submit testimony to
17 you today regarding the proposed merger between
18 NationsBank Corporation and Bank of America Corporation.
19 I believe this merger will have a significant effect on
20 the people I represent.
21 "I testify today as one of many individuals who
22 will be raising questions about this merger. Many
23 consumer groups, community activists, and business
24 persons are worried about the inevitable closure of bank
25 branches, layoffs, the proliferation of evermore costly
26 bank fees, and a basic inability to have direct contact
114
1 with local bankers.
2 "I have been struggling with these issues for
3 quite some time. I am even considered to be an irritant
4 to many CEO's and top bank managers in this country. I
5 believe, however, that my first responsibility is to
6 represent consumers who expect their elected officials to
7 protect them from public policies that create hardships
8 in their lives and have constantly challenged the banking
9 community to pay attention to inner cities and rural
10 communities.
11 "In January of this year, I took the
12 extraordinary step of hosting Chairman Alan Greenspan,
13 former comptroller of the currency, Eugene Ludwig, and
14 director of the Office of Thrift Supervision, Ellen
15 Seidman, in my district to interact with members of
16 congress, senior bank officials, community bankers,
17 community-based organizations, and small business
18 owners. This occasion afforded the captains of the
19 industry and the regulators the opportunity to interact
20 with people of my community who are desperate to
21 strengthen ties to the banks in order to grow and help
22 our communities.
23 "I believe that those in attendance got the
24 message I constantly irritate them about. We need
25 capital, we need investment that will eliminate blight,
26 create businesses, create ownership, create a new
115
1 generation of entrepreneurs, and create a better life for
2 those who have been denied access to comprehensive
3 banking services.
4 "In 1995, the Federal Reserve paid the national
5 average of banking officers per 10,000 residents at 3.4.
6 The average in South Central was only 0.3 offices per
7 10,000 residents or one branch for every 41,700
8 residents. In 1996, Federal Reserve data showed South
9 Central Los Angeles received only 1.6 percent of loan
10 dollars for small business lending but represented 2.5
11 percent of small businesses. White-owned businesses
12 still received three times more loan dollars per dollar
13 of equity than do African-American businesses with
14 identical borrowing characteristics. In the construction
15 industry, this disparity increases from 3.1 to 15.1.
16 "As we participate in the hearing today, the
17 federal government is implementing a new system of
18 payment for welfare and social security recipients.
19 These citizens will be receiving their grants and
20 payments via electronic transfer. Many of these citizens
21 have never had a bank account or access to any banking
22 services. In addition, we're discovering many banks do
23 not provide them with the services they need to receive
24 their electronic transfers.
25 "There are banks that also have arrangements
26 with check cashers to keep citizens, many of whom are new
116
1 citizens to this country, out of their banks. These
2 people who lack access to banking services must resort to
3 check cashers, who charge absorbent fees for cashing
4 checks and often do not provide other needed services.
5 "Although branches have been closing down
6 everywhere as a result of other mergers, branch banking
7 has never adequately served urban and rural communities.
8 When we add to all these concerns the lack of capital to
9 deal with deteriorated and underdeveloped inner cities
10 and rural communities, you can then understand why we
11 question all mergers.
12 "We do not oppose mergers for the sake of
13 opposing mergers. We have real issues. Although there
14 have been some improvements in home lending and the
15 provision of home mortgages -- in fact, total home
16 lending in South Central actually increased 28 percent
17 from 1995 to 1996 -- it has not been enough to allow many
18 families in low-income communities to achieve the dream
19 of home ownership.
20 "Are we to expect this colossal merger is going
21 to correct any of the concerns I've delineated here
22 today? The conventional wisdom in my community is as
23 banks become bigger, a greater distance is created
24 between the institutions and the communities they're
25 supposed to serve. In other words, they'll truly be too
26 big to be bothered.
117
1 "My question today is what will this merger do
2 to ensure the communities will not be worse off? What
3 can we do to insure CRA will be honored, that capital
4 will be made available, and access to banking services
5 will be made more likely.
6 "Perhaps these questions can be answered.
7 Perhaps mergers can be used to bridge the gap between
8 banks and communities. But what plans are banks placing
9 before our communities that will inure to our benefit?
10 We're very much aware of so-called commitments that have
11 been made in the past. We're aware of the 45 billion
12 dollar commitment from Wells Fargo, their 140 billion
13 dollar commitment originally committed by Bank of
14 America, and the $75 billion committed my Washington
15 Mutual.
16 "I now understand this new merger between
17 NationsBank and Bank of America has created a 350 billion
18 dollar commitment. We have not seen the results of
19 earlier commitments, which makes us suspicious of the
20 present commitments. We don't see tracking systems in
21 place that will tell us where, when, how, and to whom
22 this money goes.
23 "Perhaps there is a plan that's worthy of my
24 support and the support of others who will testify
25 today. If there is, then it's time for the banks to roll
26 it out. It is time for the banks to create and implement
118
1 a concrete, straightforward, verifiable plan with
2 specific commitments that will deal with all aspects of
3 the problems that I've repeatedly identified.
4 "I'm not here today asking for a gift from the
5 banks. We expect banks to get a reasonable return on
6 their loans and investments. We believe that banks that
7 lend money in our communities can make a profit on those
8 loans and do it safely and soundly.
9 "I testify as a public policy maker and support
10 federal deposit insurance for banks to have a continued
11 safety net. I testify as a member of congress who has
12 witnessed the federal government bail out both savings
13 and loans and banks with taxpayer money, and I'm here to
14 insure that taxpayers receive the support and respect of
15 the banks that we insure and protect.
16 "How can we work together to increase home loans
17 and introduce new products and investments that help the
18 average wage earner own a home? I conclude my testimony
19 by making an appeal to the banks in this merger to
20 respond to all the issues that I and others have and will
21 discuss today and to work with elected officials,
22 community organizations, community lenders, and consumers
23 in ways that will help to develop well-rounded
24 communities with decent housing, commercial enterprises,
25 and entrepreneurial opportunities. Thank you.
26 MS. SMITH: Thank you very much.
119
1 MR. GNAIZDA: Thank you very much for this
2 opportunity. Before I begin and we take our time, I just
3 want to let you know we have approximately ten speakers
4 who will be taking about approximately three minutes each
5 and then we have approximately 12 others who will try to
6 keep their remarks to approximately a minute. And we'll
7 try to be within the 50 minutes.
8 And before I use my time, I just want to express
9 a sentiment that many panelists have expressed, and that
10 is where are the CEO's to hear us? Where are they?
11 I'm only going to respond to the largest
12 absentee landlord statements, and I'll restrict myself to
13 that. And these are concerns expressed by three
14 congresspersons today, Waters, Alford, and Lee. And I
15 preface it with this: There's no data. There are no
16 goals. The achievements are modest and particularly
17 modest in comparison to their competitors, Wells Fargo,
18 Union Bank, and WaMu.
19 And one thing has been lost here by Mr. McColl
20 and Mr. Coulter. They intend to be the largest bank in
21 the world. They can't just be average. They must be the
22 best, the best. And they're not.
23 First, McColl says they're great on charity.
24 Why doesn't he tell you they have the lowest percentage
25 of pre-tax earnings directed to charity of any of the
26 major banks, just under one percent? Wells has two
120
1 percent. Why don't they tell you that only ten to 20
2 percent is directed at the community? Wells Fargo last
3 year directed 85 percent or more than eight times more as
4 a percentage. And why don't they tell you that their
5 executive compensation every year for the top officers
6 exceeds their total charitable contributions? And why
7 don't they tell you about their Golden Parachutes? They
8 will exceed by five-fold the total amount of charitable
9 contributions that the B of A will make. Compare that
10 with their competition.
11 On diversity, they're high on diversity, but
12 they won't release their data and they won't set any
13 goals. Washington Mutual has set goals and is releasing
14 its data. Their goals are to reflect this panel and this
15 audience, not an all white male panel. Minority
16 contracts, they won't release their data. They can't
17 it's so low.
18 The real statistic for NationsBank if you look
19 at all contracts just for minorities, not minorities and
20 white women, is just about four percent, meaning a little
21 over one and a half percent for each of the minorities.
22 B of A it's two percent for African-Americans. Compare
23 this with Washington Mutual's goal of 40 percent for
24 minorities.
25 Minority business loans, this is what they fear
26 the most. And they have every reason to. The moment
121
1 Alan Greenspan says, "I want the Federal Reserve to
2 scrutinize the business loans," this merger cannot be
3 approved.
4 Considerably less than one percent of the dollar
5 volume of all business loans made by NationsBank in any
6 year in its history or B of A in its history went to
7 African-American-owned businesses. Similarly for Latino
8 and Asian-American businesses. Why don't they produce
9 that data?
10 And they talked about two billion in lending in
11 low-income areas. Why doesn't the Federal Reserve look
12 at that data and see that 90 percent want to white-owned
13 businesses, including a huge amount around the World
14 Trade Center.
15 Lastly, they say they got the best goal in
16 America. That's untrue. Adjusted for size, Washington
17 Mutual has easily beaten them. They've committed six
18 percent of their assets. Washington Mutual has committed
19 eight and they're specific. The OTS will be able to
20 effectively scrutinize them.
21 Lastly, one comment by CEO Coulter, whom we have
22 great respect for and we're very sad that he will be
23 departing. Because that is the feeling, he will be
24 departing. That's why Greenlining and other groups from
25 all other the country serenaded him yesterday with a
26 Mariachis band. We're sorry he's going.
122
1 But, Mr. Coulter, we have to tell you this:
2 That B of A has lent far more in South Korea than it lent
3 in South Central in the last 50 years. And it's lost far
4 more in South Korea, 3.1 billion, than it ever lost in
5 the black community, the inner city, the Hispanic
6 community, and the Asian community.
7 Gail Smith from our coalition presented a letter
8 earlier to Mr. McColl and Coulter as they fleed the
9 scene. It asked for a community meeting today so that
10 they can hear these concerns. We invite all of you if
11 the B of A will respond. Thank you.
12 We now have our guest from the furthest away,
13 from Texas, if she'd begin.
14 MS. CAMPBELL: Thank you. Thank you for the
15 opportunity to appear today. I am Angelique Campbell,
16 and I'm from the Texas Office of Consumers Union and I
17 represent the Texas Community Reinvestment Coalition.
18 And I come today on behalf of TCRC to discuss our
19 concerns about the merger's impact on low-income
20 consumers and persons of color in Texas.
21 We believe our position in this merger is unique
22 since NationsBank and Bank of America are two of our
23 state's largest financial institutions, NationsBank being
24 the largest in Texas. If the merger is approved, the new
25 bank will control an even larger share of the Texas
26 market.
123
1 As the only statewide community reinvestment
2 group in Texas, TCRC's interest is ensuring that the
3 credit needs of our local communities in Texas are not
4 ignored. But unfortunately, our most recent HMDA study,
5 which is "Access to the Dream, Home Mortgage Lending in
6 Texas," which you all have a copy of, shows that there
7 are problems with NationsBanks and Bank of America's
8 lending performance in low-income communities and
9 communities of color in Texas.
10 If the merge bank is to lead the financial
11 industry in community lending as it asserts that it will,
12 then the board should delay this merger for two reasons,
13 to address unresolved questions about the bank's current
14 performance and to require conditions prior to approval
15 to assure that all communities credit needs are met.
16 Without a detailed plan, the 350 billion pledge
17 is hollow. And based on the two banks' performance in
18 under-served communities in Texas, TCRC questions the new
19 bank's ability to meet this pledge.
20 The bank needs to make firm, binding geographic
21 income and ethnic specific commitments, and the
22 regulators need to monitor and enforce those commitments
23 in the following areas: We ask that no branch closings
24 occur in low-income communities and communities of
25 color. In Texas, when we suffered from 40 percent of the
26 NationsBank failures in the 1980's, it was our low-income
124
1 neighborhoods that were affected most by the bank
2 closures. As banks moved out of those neighborhoods,
3 higher cost non-bank institutions moved in.
4 It concerns our coalition that of the total
5 number of NationsBank branch openings and closings that
6 occurred in 1996, upper and middle income areas received
7 40 new branches while low and moderate income communities
8 only received ten.
9 We are also asking for improved lending
10 performance to persons of color. In Texas, according to
11 our study, African-American and Latino borrowers are two
12 to three times as likely to be denied for a home loan by
13 NationsBank than a white borrower. Data also shows
14 NationsBank disproportionately loaned 86 percent of their
15 dollars for home loans to white borrowers.
16 In some Texas cities, the disparity is worse.
17 In the Beaumont-Port Arthur MSA, two majority
18 Africa-American cities, NationsBank made only four loans
19 to black families, and only one of them in a black tract
20 census area, yet NationsBank holds nine percent of the
21 deposits in that particular MSA.
22 In San Antonio, NationsBank holds 14.5 percent
23 of all deposits in the city while Bank of America
24 controls another 5.5 percent, yet NationsBank made only
25 1.7 percent of San Antonio's home loans.
26 And in the Fort Worth-Arlington MSA, another
125
1 majority African-American city, NationsBank made only two
2 loans in a black census tract area, yet its depository
3 share in that city is 15.1 percent.
4 We are also asking for the development of
5 desirable affordable housing products. The most recent
6 HMDA data shows Bank of America disproportionately
7 targets Texas low-income consumers and persons of color
8 with manufactured housing loans. The interest rates on
9 these home loans have ranged as high as 13.25 percent,
10 substantially higher than the average seven percent rate
11 for a 30-year conventional loan.
12 Since Bank of America's recent decision to sell
13 its manufactured housing unit, Bank of America has not
14 offered an alternative affordable housing plan which
15 meets their community reinvestment obligation,
16 particularly in Texas.
17 We watch these changes in the banking industry
18 with deep anxiety for the effects the mergers will have
19 on our communities. Loss of competition, higher fees, an
20 erosion of CRA come to mind. The single most important
21 step that must be taken in the wake of these bank mergers
22 is to increase accountability of our lenders to our
23 communities' un-met banking and credit needs. And it is
24 not only the right thing to do. It is the law.
25 We trust that the board will do what is
26 necessary to ensure that our -- that the banks remain in
126
1 compliance with our fair housing and fair lending laws
2 and accountable to our credit needs. Thank you.
3 MR. OBLEDO: My name is Mario Obledo. I'm the
4 president of the California Coalition of Hispanic
5 Organizations. And I'm also representing the League of
6 United Latin American Citizens, otherwise known as
7 LULAC.
8 We feel that the merger has been approved.
9 Without any disrespect whatever, if it had not been
10 approved, Alan Greenspan would have been here chairing
11 the meeting at the headquarter cities of Bank of
12 America. Instead, they have sent a lower level
13 bureaucrat to conduct this very, very important meeting.
14 NationsBank is fully aware of the request of the
15 Greenlining Coalition. Whether they will respond or not
16 is up to them. Our quarrel is not with the Federal
17 Reserve Bank. Our quarrel is with NationsBank and Bank
18 of America. If they do not meet their commitment to the
19 people of color of the state of California -- and, by the
20 way, the Greenlining Coalition represents the majority of
21 the people of the state of California -- we are going to
22 demurrage the merger. We will act as our own Federal
23 Reserve board. We will close down the branches and we'll
24 ensure their failure in California.
25 We're not going to stand for any disrespect by
26 corporate America. The people of color are people of
127
1 pride and honor and courage, and we will teach them a
2 lesson. This is going to be a street fight and we're
3 prepared to engage in it. Thank you.
4 MR. NGUYEN: Good morning. My name is Philip
5 Nguyen. I'm the executive director of the Southeast
6 Asian Community Center.
7 Now, we all agree that the American has
8 experienced an unprecedented booming economy. The good
9 thing is that the rich become richer and the poor -- the
10 bad thing is the poor become poorer. The gap between the
11 rich and the poor is greater than ever.
12 Now, as the greatest nation at work, as the
13 people, and we so suggested we cannot afford it. Now,
14 that isn't why the congress enact the 1977 CIA.
15 Now, many people here believe that the deal has
16 been cut. The merger will be approved regardless of what
17 we're going to say. I tried not to believe so. I tried
18 to believe that the merger will be approved with certain
19 condition.
20 Now, one of the conditions is that the CIA.
21 The merger, the NationsBank, and the Bank of America
22 promise to have $350 billion for the CIA, but it don't
23 say anything. As my colleagues point out, these are
24 hollow commitment. When they don't have any specific on
25 how much they help the poor, how much they help the
26 minority, and how much they have the women and the
128
1 low-income, the low area. We would love very much that
2 the NationsBank and the Bank of America spell out
3 specifically what they want to help, the poor, the
4 minority, the women, and how to improve the low-income
5 minority.
6 The second condition -- and I'd like to point
7 out is if there's a merger, it should be tried to have
8 the minimum branch go out, the minimum -- I mean,
9 employee be laid off. The better is nobody would be laid
10 off, no branch be closed down.
11 Now, these are the two minimum requirement and
12 we would like the NationsBank and Bank of America to
13 commit to this one. They should follow the example of
14 the Western Mutual. They may be even better, therefore,
15 because they're bigger bank.
16 Now, if these minimum requirement has not been
17 met, they choose to ignore it, please convey our message
18 to Mr. Greenspan stop the merger. Thank you.
19 MR. GLOVER: Good morning. My name is David
20 Glover. I'm the executive director of the Oakland
21 Citizens Committee for Urban Renewal and board member of
22 the Greenlining Institute.
23 Unlike many who may feel that this is an
24 absolute fait accompli, I would hope that the review
25 panel and others are receiving the appropriate education
26 and the appropriate facts this morning that may be
129
1 opening some eyes.
2 I stood alongside members of the Gionini family
3 just a couple months ago at a founders day at an East
4 Oakland outlet at Eastmont Mall celebrating the remaining
5 branch of 30 years in that community, and I only wonder
6 in light of this proposed merger what will happen to that
7 branch and certainly what that symbolizes in terms of the
8 original principals of the Bank of Italy and lending in
9 the alternative way and serving the under-served as the
10 institution believed.
11 We are clear on the fact that even though the
12 film "It's a Wonderful Life" may have been financed by
13 the bank, it is not a wonderful life in Oakland. It is
14 not a wonderful life in San Francisco, LA, Richmond, and
15 a number of other communities in the California area.
16 Urban centers are suffering from the lack of lending,
17 credit, branches, access, et cetera. We have to deal
18 with the critical issues that face California in light of
19 the loss of this partner, this community lender. Feels a
20 little bit like the Cleveland Browns. You know, even
21 they received compensation when Art Modell pulled out of
22 town.
23 We are looking at the testimony from Florida,
24 from Texas, from North Carolina, and we see that we are
25 not inviting a good neighbor into this marriage. And we
26 can't really call it a marriage. It's really an
130
1 acquisition. There are things about this 350 billion
2 dollar pledge that, as Stella said earlier, are scatter
3 gun and we like to call it hollow. In many ways it's
4 regressive.
5 The Greenlining Institute has set alongside many
6 CEO's and negotiated agreements that really
7 quantitatively speak to the goals for California and the
8 goals for the low-income community, the goals for
9 minority lenders, the goals for those who have to survive
10 at management level and at line staff level. And we
11 don't see any of that disclosure here. We see none of
12 that good faith.
13 It is important to talk about California
14 compensation, it is important to talk about the
15 principals by which we have to survive in this community
16 and other inner cities around the country.
17 I'm not encouraged by what I hear from Nations
18 as a partner. I think it's important to look at welfare
19 reform and the impact it's having on this community.
20 It's important to look at 209 and the impact it's having
21 on this community and bring it back to lending and talk
22 about a partnership that has to be either approved or
23 disapproved based on its quantitative delivery for a
24 community that has no place to turn.
25 And I appeal to not only the process being
26 broadened on a public hearing level but to you to not
131
1 just consider this to be, as Kevin said, a golf course
2 deal that's already sealed. Let's look at this list.
3 Let's open it up and let's examine it for all that it has
4 to be in order for citizens to be adequately served in
5 this community. Thank you very much.
6 MR. HEAD: My name is James Head, and I'm the
7 president of the National Economic Development and Law
8 Center, which is based in Oakland, California.
9 The center is a national nonprofit public
10 interest community and economic development technical
11 assistance provider. I'm also on the board of the
12 California Reinvestment Committee here in California and
13 a board member of the California Economic Development
14 Lending Initiative, as well as a former member and
15 chairman of California Advisory Council of the Federal
16 Reserve. And it's good to see you, Dolores, again after
17 so many years.
18 MS. SMITH: Good to see you.
19 MR. HEAD: This week I received a telephone
20 call from a reporter with the American Banker Newspaper
21 in Washington D.C., and he wanted to know why I was going
22 to testify at this hearing. And I found this question a
23 little odd, so I asked him sort of what was the basis of
24 the question. And he explained to me that in light of
25 the fact that opportunities to present written comments
26 were available and that many people had done so, what
132
1 would be accomplished by appearing in person and
2 testifying?
3 I responded to him that it is important for
4 those making decisions in matters like this to attach
5 faces and descriptive facts and antidotes to the issues
6 to be decided. This gives context and hopefully some
7 grounding to the issues. It's also important for those
8 who are making these unique decisions to understand that
9 there are a lot of issues related to unique states like
10 California and others who will be impacted by the
11 merger.
12 So my feeling is that a part of this process is
13 to help those who are deciding this matter shape the
14 information that they have, to look at it from the
15 standpoint of how this may impact the communities either
16 positively or negatively by the decisions that are made.
17 My remarks are not going to focus on whether --
18 whether this merger should or shouldn't be approved. My
19 remarks will focus on a couple of key issues that I think
20 are critical to a decision about the merger.
21 One of them is loans to minorities. And you've
22 heard a lot about the facts and issues related to loans
23 to minorities. I think there continues to be a continued
24 perception, if not reality, to the fact that, in general,
25 minorities are not getting loans in the same volume or at
26 the same levels as their white counterparts. While these
133
1 perceptions are very difficult to either verify or
2 dismiss, there is information either antidotal or factual
3 that continue to support it.
4 I would point you back to a Wall Street Journal
5 poll that was done a number of years ago of several
6 hundred black business owners who found that 92 percent
7 of them said that they had been turned down by banks
8 while trying to finance their firms. They stated that
9 lack of collateral, a paucity of black lenders and loan
10 officers, and a public perception that blacks lacked
11 business acumen was among the major reasons they felt
12 that they were not able to get this collateral.
13 For all of those complaints, however, banks
14 are -- over 73 percent of these same firms indicated they
15 ultimately obtained their collateral. When asked what
16 would be their preferred source or sources of capital, 63
17 percent responded that banks were their preferred
18 source.
19 Does this mean that NationsBank and Bank of
20 America are not lending equitably? While I can't speak
21 to NationsBank's record of lending to minorities, my
22 experience with Bank of America is that they have made
23 great efforts and with a lot of success in expanding
24 their lending to minorities. But if you hear from others
25 that this is an issue of concern and you accept the fact
26 that the generally perceptions continue to exist, you
134
1 should closely examine the records of these two
2 institutions regarding minority lending and should
3 determine whether the merger increases their capacity to
4 be responsive.
5 The next issue is equity capital for startup and
6 expansion businesses. In an presentation at a community
7 investment and access to credit meeting in Los Angeles in
8 January of this year, Chairman Alan Greenspan suggested
9 that additional debt through loans might not be the most
10 effective solution to meeting the needs of communities
11 like South Central. He suggested that equity investments
12 might prove to be more effective and key to immediate and
13 long-term economic revival.
14 For a number of years now, California advocates
15 have been discussing and educating Bank of America staff
16 on the need for loan products that provide equity or
17 patient capital for new and expanding businesses. This
18 need can serve the merging nonprofit sector that are
19 developing successful for-profit businesses to bring jobs
20 and goods to low-income communities, the emerging
21 entrepreneurs like, welfare recipients, youth, and
22 skilled, unemployed, and underemployed workers that are
23 identifying small business niches that can help them
24 become economically self-sufficient, and emerging and
25 expanding small businesses that are trying to continue
26 the creation of employment and economic stability in
135
1 low-income communities.
2 Our discussion with Bank of America has been
3 around strategies and mechanisms for developing loan
4 products that will address the credit needs of these
5 constituencies and also will allow the bank to make
6 money.
7 We hope that you will question NationsBank and
8 Bank of America on their willingness and commitment to
9 continue to work towards addressing these critical
10 needs. At the very least, we believe that the merged
11 bank should commit to being the leader in the development
12 of loan products that provide the kind of patient capital
13 that's needed. This is cutting edge work, and it should
14 not be abandoned or delayed because of the application
15 for merger.
16 The last issue is one that is dear to me because
17 we put a lot of time in it. During the first quarter of
18 '98, Community Economic Development leaders and Bank of
19 America staff collaborated to development an innovative
20 community economic development philanthropic initiative
21 called readiness for the 21st century to promote economic
22 readiness for individuals, communities, and
23 community-based organizations.
24 We put a great deal of time into the development
25 of this initiative, which was tied to the bank's 140
26 billion dollar community lending commitment. We would
136
1 hate to see this initiative either delayed or either
2 forgotten in the process of this merger. We feel that
3 this is an appropriate approach to putting some meat to
4 the NationsBank 350 billion dollar commitment and hope
5 that you will consider it.
6 I've been told that my time is up, and I will
7 conclude with this by turning back to where I started.
8 Initially I'm convinced that it is important to
9 communicate these issues in person. The various opinions
10 I've heard this morning only reconfirms to me that
11 opinion. In business as in life, you gain more by direct
12 dialogue and debate than by indirect prose and
13 avoidance. Also, words alone can sometimes lack impact
14 and emotion. Imagine if we only had Dr. King's "I Have a
15 Dream Speech" in a written version rather than the
16 powerful presentation he delivered in Washington or
17 President Kennedy's promise of a man on the moon had been
18 only in an editorial in the Washington Post rather than
19 the inspired delivery we have all seen.
20 Lastly, even in the face of advancing technology
21 like the Internet, some of us are still more comfortable
22 making our point in a face-to-face discussion than
23 those -- with those responsible for making the final
24 decisions. That is why I'm here to speak today and why I
25 hope you will create opportunities for us to have
26 continued face-to-face discussions with NationsBank and
137
1 Bank of America. Thank you.
2 MR. WILLIAMS: Good morning. My name is
3 Clarence Williams, and I am here on behalf of the
4 Sacramento Black Chamber of Commerce and California
5 Capital Small Business Development Corporation and as
6 much as I serve in the capacity of president of both
7 organizations. In addition, I am a founding and current
8 member of the Bank of America Community Development Bank,
9 Community Development Bank Advisory Board.
10 The Sacramento Black Chamber of Commerce is a
11 501C6 membership organization established more than 12
12 years ago for the purpose of mitigating and eliminating
13 arbitrary and discriminatory barriers which preclude
14 African-American-owned businesses from fully
15 participating in the marketplace.
16 California Capital is a Northern California
17 based 501C3 corporation under contracts with the State of
18 California and the Sacramento Municipal Utility District
19 to provide loan guarantees on bank loans. In addition,
20 we are contracted with the Solano County Organizing
21 Committee and with the Federal U.S. Department of
22 Agriculture and Rural Development Administration to
23 administer loans, several in rural areas of Northern
24 California.
25 The purpose of my testimony is to support the
26 cause of the Federal Reserve Bank and its continuing
138
1 obligations to the community development and
2 revitalization and to emphasize that as a condition of
3 the merger of these institutions, a specific negotiated
4 overall written commitment of dollars, products, and
5 services must be required for California and its
6 respective regions, with my concern focusing on the
7 Sacramento Valley.
8 To date, these institutions have been unwilling
9 to make a specific written commitment to California.
10 Without such a commitment, under-served inner city and
11 rural communities must rely on a "trust us" commitment.
12 Consequently, we are being asked to acquiesce to
13 this merger on the basis of blind faith. These
14 institutions are profit motivated, and their primary
15 concern is return on investment for shareholders.
16 Creating jobs, and community reinvestment is not
17 necessarily perceived as being in their primary economic
18 interest.
19 However, our communities cannot remain silent
20 and inert as the number of financial institutions
21 continue to contract from as many as 25,000 to a
22 projected eight, six, or 4,000. This contraction and a
23 debate thereof should not be restricted to an analysis
24 that only pursues the goals of increased efficiency and
25 global competitiveness if these goals are at the expense
26 of inner city and rural communities.
139
1 We cannot accept costs such as increase in
2 unemployment and investment being shifted from the
3 balance sheets of banks to the banks of our communities.
4 If financial institutions and their shareholders are the
5 beneficiaries of consolidation, then our communities
6 should also realize substantive benefits and not only be
7 required to absorb the costs of this proposed
8 consolidation.
9 Furthermore, it is obvious that these financial
10 institutions view negotiated written commitments as
11 mitigation to transfer negative cost impacts resulting
12 from consolidation. If accepted as mitigation by the
13 community, we must assure that these scarce dollars and
14 resources are firmly committed in writing and reinvested
15 for the purpose of community growth and sustainability.
16 I am certain that my testimony at these hearings
17 will identify numerous -- I am certain that the testimony
18 at these hearings will identify numerous and specific
19 instances where the principals of this merger have been
20 unwilling to specify in writing the commitments necessary
21 for the approval of this application. However, I shall
22 note for the record their failure to increase Bank of
23 America's 1997 70 billion dollar allocation to
24 California, to support nonprofit technical assistance
25 providers who assist small businesses, to make equity
26 investments and CDC's and SBIC's, to provide venture
140
1 capital to minority and women-owned businesses located in
2 distressed areas, to purchase at least 25 percent of its
3 goods and services from minority and disabled-owned
4 businesses, and to make a written commitment maintaining
5 Bank of America Community Development Bank, along with
6 its institutional expertise with regard to community
7 reinvestment.
8 In closing, I am aware of the Federal Reserve's
9 specified authority to enforce and negotiate a
10 commitment. Nothing precludes this panel from verifying
11 whether agreements made by the participants of this
12 merger represent either billions of dollars, smoke and
13 mirrors, or a substantive written covenant of commitments
14 involving long-term partnerships and relationships to
15 revitalize and to sustain inner city and rural
16 communities. Thank you.
17 MR. CORRALEJO: My name is Jorge Corralejo.
18 I'm on the board of directors of the Latin Business
19 Association. The Latin Business Association is one of
20 the largest chambers of commerce in the United States.
21 We represent part of the largest or the faster growing
22 entrepreneurial segments in America.
23 We know that any financial institution should be
24 interested in conducting business with us. I think we
25 all know that all of us that represent all of the
26 organizations that are here today. But what we see
141
1 developing here is a battle brewing. And being a
2 business person, it's not in my interest to see this kind
3 of development occur. I think that it's important that
4 we take a look at who is here, the depth, the depth and
5 the breadth of the people that are here expressing these
6 strong, strong concerns regarding this acquisition.
7 I have just a copy of an article from American
8 Banker, NationsBank making overtures towards Hispanics.
9 In this article, it states that, "Hispanic groups have
10 not formally protested the merger but they do have
11 concerns." Well, this is wrong. We are formally
12 protesting the merger. Not just the LBA, but we're
13 working in concert with several other organizations,
14 statewide and nationally, including -- I'll give some of
15 the names -- American G.I. Forum, California Coalition of
16 Hispanic Organizations, California Hispanic Chambers of
17 Commerce, Chicano Federation of San Diego, Mexicana
18 National, ourselves, Latino Issues Forum,
19 Mexican-American Growers Association, and Los Angeles
20 Community Union. That's just a small sampling of some of
21 the people who are organized in protest of this merger,
22 this acquisition.
23 So I want you to take to heart the level of the
24 concern that is expressed here. We understand that we
25 represent the majority of people and will become the
26 majority of businesses in the State of California. How
142
1 can you approve the acceptance of a monopoly situation
2 without any kind of working agreement? We in California
3 have a history over the last several years of working
4 with a majority if not almost all of the financial
5 institutions and have developed successful and profitable
6 businesses at our end, as well as their end.
7 And I think that's a critical impact here, is
8 that we're looking to develop wealth in all of our
9 communities over a period of time. And I think without
10 the kind of working relationship that we're seeking,
11 we're certainly requesting that you take some time. And
12 I hate this discussions -- the discussions about this
13 being a done deal. I hope that's really not the
14 situation. That you postpone a decision to enable other
15 organizations to continue to express their concerns with
16 what is at hand here.
17 And, also, to take a look at perhaps proposing
18 the idea that they do, in fact, continue to work with us
19 to work on some goals. We're not talking about enormous
20 goals that don't make sense. We're talking about goals
21 over time. Especially in our situation where we're
22 dealing again with a majority of Californians. So we ask
23 at least that much, if not much more. But please take it
24 from us.
25 And like I said earlier, we are in concert with
26 several other organizations in protesting this merger.
143
1 So contrary to other evidence, let it be on record that
2 this is, in fact, the case. Thank you very much.
3 MS. SMITH: Thank you.
4 MR. RICHARDSON: My name is Carlos Richardson.
5 I'm with Neighborhoods First Alliance. I'm from San
6 Antonio, Texas. I'd like to give special thanks to
7 Angelique Campbell and Consumers Reports.
8 What I have to offer this morning are simple
9 facts. Based on the most recent HMDA data, it is
10 reflected NationsBank has redlined eastern San Antonio
11 community. There were three loans made in our
12 neighborhood. One loan was made to one Hispanic for
13 $14,000, another to one African-American $21,000, and one
14 undisclosed ethnic group for $26,000.
15 NationsBank began negotiations with
16 Neighborhoods First Alliance with this statement: "We do
17 not sign agreements with neighborhood groups." This is a
18 clear demonstration of the lack of will in making a
19 commitment. NationsBank also refused to agree to any
20 measurable goal or timetable to rectify problems, thus
21 refusing to be held accountable for its performance due
22 to such institutional policies as redlining the eastern
23 sectors economically deprived.
24 The neighborhood is populated by the elderly and
25 working poor and has not been a participant under the
26 economic growth of San Antonio. The area is besieged by
144
1 warehouses, encroachment, tank farms, and hazardous
2 waste, and lack of mortgage and lending and is denying
3 the residents of the neighborhood, the type of investment
4 that -- this is the type of investment that destroys
5 living environment and ultimately the neighborhood
6 itself.
7 After the Neighborhoods First Alliance requested
8 NationsBank incriminating HMDA data, an executive of the
9 bank discovered one of the members was employed by The
10 United Way. The executive called United Way and the
11 leader involved was ultimately put on job probation.
12 This attempt to cripple our neighborhood leadership
13 demonstrates this corporation's arrogance and willingness
14 to use its power to step on the poor communities.
15 I'm also a member of the Housing Trust. And
16 although I can't speak for them now, it is part of the
17 research I've done in that capacity that has shown that
18 this organization has been lying, nursing at the tip of
19 government while our elderly have burned to death in
20 their homes.
21 We're opposing this merger and we hope that we
22 can seek help from our federal government to see that it
23 doesn't happen. That's all I have to say. And thank
24 you.
25 MR. DILLARD: Good morning. First let me thank
26 you for the opportunity to address this vital and
145
1 important issue concerning the merger of Bank of America
2 and NationsBank.
3 My name is Eddie Dillard, and I'm president of
4 the Oakland Black Board of Trade and Commerce, an
5 organization of small and midsize Oakland-based black
6 business owners.
7 The Oakland Black Board of Trade and Commerce is
8 an advocate for small business growth and development.
9 We create employment opportunities in our communities and
10 contribute to a tax base of the city of Oakland.
11 I'm also a member of the Economic Development
12 Advisory Commission for the City of Richmond and an
13 Oakland-based small business owner.
14 With me today are four members of the Oakland
15 Black Board of Trade and Commerce, Mr. Bill Matthews,
16 owners of Uniform America, a clothing manufacturing
17 company, Mrs. TJ Robinson, owner of the Gingerbread House
18 and Restaurant, Mr. Garfield White, president of Select
19 Communications, a telecommunications company, and Mr. Ron
20 Carter, owner of FARC Construction Company and a member
21 of the board of directors of the Bay Area Black
22 Contractors Association.
23 Each of these Oakland-based black business
24 owners were denied financing by Bank of America. Not
25 only have these worthy small black business owners been
26 denied access to capital, but the honorable mayor of the
146
1 city of San Francisco, Willie Brown, and the honorable
2 mayor of the city of Oakland, Mayor Elihu Harris, were
3 denied a loan from Bank of America in an attempt to
4 purchase a radio station in the city of Oakland.
5 Over the past ten years, we've witnessed a
6 dramatic decline in the availability of access to capital
7 in the city of Oakland and the San Francisco-Oakland Bay
8 Area in general. There are approximately 554 banks in
9 the state of California. Only two of these banks are
10 African-American banks.
11 The recent mergers of large banks is threatening
12 to create less competition and more Monopoly control of
13 the availability of credit to the black community. Bank
14 of America's recent public relations campaign slogan,
15 "let's be neighbors," flies in the face of reality. The
16 lack of small business growth in the black community can
17 be directly attributed to the downsizing of Bank of
18 America in the black community.
19 The black community contributes substantial
20 revenues to Bank of America's bottom line. For example,
21 of the 340 black churches in Oakland, 40 percent bank
22 with Bank of America. That means that every Monday,
23 approximately 136 black churches deposit $400,000 into
24 Bank of America's system. This represents approximately
25 $20 million annually. Yet we've seen Bank of America
26 abandon our community, forcing our church members, small
147
1 black business owners, nonprofit organizations, and
2 citizens to travel outside of our community for banking
3 services.
4 Bank of America's market shares is approximately
5 40 percent of the 379 black individuals who reside in the
6 nine Bay Area counties. Bank of America has been
7 unresponsive to the credit needs of the black community
8 while providing lip service to the black community
9 through sponsorships of high profile and special events.
10 We've seen Bank of America and other financial
11 institutions spend billions of dollars to reconstruct
12 countries like West Germany, Indonesia, Korea, and even
13 Russia at the expense of American blacks. Charity
14 begins at home.
15 For the past 50 years, we've seen a
16 deterioration of our communities to the point where today
17 many of our neighborhoods look like boarded out war zones
18 with boarded up commercial stores and severely
19 dilapidated housing. In the past decade, we've watched
20 Bank of America expand in the suburbs and shopping malls
21 and grocery stores outside the inner city and provide a
22 wide range of financial services to the white communities
23 that remain unavailable to the inner city black
24 community.
25 For example, in West Oakland, an area of
26 approximately 27,000 residents, Bank of America at one
148
1 time had four branches. Today there are none. As a
2 direct result of this wholesale denial of credit, this
3 community has no pharmacy, no grocery store, and no
4 bank. Has the wholesale withdrawal of Bank of America
5 affected this community?
6 Most assuredly. Another example is East
7 Oakland, an consisting of 48,000 residents. Bank of
8 America at one time had seven branches. Today there are
9 three. Not only has this abandonment of our community
10 forced blacks to travel on average four miles for banking
11 services, but the reduction in employment has caused
12 undue hardship to many black families and the community
13 at large.
14 One black church member told me that for 50
15 years, she had a checking account and a savings account
16 with Bank of America. When she retired from two
17 full-time careers, she decided to remodel her home, which
18 was estimated to cost $23,000. With annual retirement
19 income of over $3,000 a month, she was denied a
20 refinancing loan by Bank of America. Three weeks later
21 she qualified for a larger loan from another institution
22 with a more favorable interest rate and a payment
23 schedule that fit within her budget.
24 This is but one example of how Bank of America
25 has consistently denied blacks access to capital. Bank
26 of America has raped the black community of our resources
149
1 and transferred our savings and deposits to communities
2 that have no direct or indirect impact on the quality of
3 life in the black community in Oakland.
4 For example, Bank of America provided the
5 financing for the Shorenstein Development Company to
6 purchase the city center project in downtown Oakland and
7 the amount estimated to be $23 million and reported this
8 financing under CRA as a loan to a minority. Well, the
9 truth of the matter is the Shorenstein Company is one of
10 the largest white-owned office and shopping center
11 developers in the country, and how the financing can be
12 designated as fulfilling its CRA objectives is not only
13 misleading but boarders on fraud.
14 I'll close with saying that Bank of America has
15 not been loyal to the black community and it does not
16 advertise effectively or in any meaningful way. The
17 withdrawal of bank services in our community has created
18 pockets of poverty, pockets which breed hopelessness,
19 anger, and despair. Only when organizations such as Bank
20 of America and NationsBank fully realize and actively
21 partner with black institutions and organizations to
22 address these issues can we say we're building bridges to
23 the new millennium. Thank you.
24 MR. HOBBS: Good morning. My name is Greg
25 Hobbs. I'm the vice president of the National White
26 Business Council and I'd also like to recognize my
150
1 chairperson of the National Black Business Council
2 sitting at the end of the table to show her support. We
3 have 75,000 businesses across the country which we're in
4 contact with electronically.
5 Today specifically I'm representing one of our
6 affiliates from the state of Florida, the Coalition of
7 Black Businesses. The Coalition of Black Businesses from
8 the state of Florida have concluded that an approval of
9 this acquisition without specific commitments to build
10 capacity for black-owned businesses will retard or
11 reverse the gains and capital access by black-owned
12 businesses in every state the bank operates.
13 Florida, we think, presents the ideal case study
14 for accessing the impact of the economic well-being of a
15 state such as California which stands to lose a major
16 heritage bank to decision makers outside the state. As
17 you know, Florida just lost its major headquarter bank,
18 Barnett Bank, to NationsBank through an acquisition. For
19 this reason, the coalition feels it is essential in
20 assessing the impact of this acquisition that the Federal
21 Reserve hold a hearing in the state of Florida.
22 Upon information and belief, NationsBank has not
23 adequately provided capital for black-owned businesses in
24 the state of Florida. Further, although reports --
25 NationsBank reports not to track race data on business
26 loans, it is our belief that less than one percent of
151
1 NationsBank's Florida business loans are made to
2 black-owned businesses.
3 We've requested the OCC do a random study of the
4 bank's loan portfolio as part of the CRA performance
5 evaluation to adequately determine what that number is.
6 However, there's a preponderance of evidence which
7 supports the coalition's claim.
8 In 1985, Florida lawmakers created a unique
9 network to provide access to capital for black-owned
10 businesses in the state of Florida. NationsBank,
11 previously NCNB, was one of the initial members of this
12 investor bank network. The network via loan guarantees
13 and direct loans has been a primary source of capital for
14 black-owned businesses in the state of Florida, providing
15 more than 40 million in capital since inception.
16 Prior to the acquisition of Barnett Bank,
17 NationsBank was the third largest member investor in this
18 network behind Barnett and First Union. But over the
19 past 12 years, NationsBank has provided only ten loans
20 guaranteed by this network as compared to Barnett, which
21 has made 117 and Sun Trust, which has made 120, and First
22 Union, who's made 75.
23 NationsBanks guaranteed loans amount to, over
24 the 12-year period, to $268,000 to black-owned businesses
25 as compared to Barnett Bank at 10.8 million, as compared
26 to Sun Trust of 9.3 million and First Union of 5.5
152
1 million.
2 The network guaranteed loans by NationsBank
3 through the system represents seven-tenths or one percent
4 of the total funding provided through this network. We
5 can go even further and take a look at SBA guaranteed
6 loans. According to SBA guaranteed loan volume reported
7 by state and race, SBA guaranteed loans by NationsBank
8 for African-Americans in the state totaled zero in 1993
9 and 465,000 in 1994. This number is important because
10 it's in our belief that 90 percent of the commercial bank
11 loans to black-owned businesses in the state of Florida
12 are provided with SBA guarantees. Therefore, SBA
13 guarantees are a major reflection of the bank's loan
14 portfolio, particularly as it relates to black-owned
15 businesses.
16 NationsBank SBA guaranteed loans for
17 African-Americans in 1994 would have represented
18 three-tenths of one percent of its small business loans
19 in the state of Florida as reported in its 1995 CRA
20 performance evaluation. Total small business loans in
21 Florida for 1995, 1996, and 1997 were not available for
22 analysis. However, it is our belief that this
23 insubstantial performance continued in these years as
24 well.
25 There's a significant group of black-owned
26 business owners, black business organizations, and black
153
1 professionals in the state of Florida which have
2 expressed concern in NationsBank delivery of credit.
3 Moreover, of the seven institutions that make up this
4 unique network in the state of Florida, after being
5 requested to submit letters of support by NationsBank,
6 only one submitted a letter of support. And it's
7 interesting to note that the one submitting that letter
8 of support for this acquisition, the president of that
9 institution is a member of the board and the chairman is
10 an area president of NationsBank.
11 The bank's insubstantial delivery of capital
12 black-owned businesses in the state of Florida is not due
13 to any lack of demand, just an extremely conservative
14 lending policy that lacks an understanding and innovation
15 in meeting the capital needs of black-owned businesses in
16 the state of Florida.
17 A lot has been said and I'm going to cut my
18 comments short by concluding that we, like many people
19 who have spoken earlier, strongly would like to express
20 that the Federal Reserve hold more hearings, particularly
21 in the state of Florida, but also that the Federal
22 Reserve compel NationsBank to sit down with community
23 groups to work out specific commitments for their CRA
24 investment within the very states which it serves. Thank
25 you.
26 MR. NEREE: Good morning, members of the board
154
1 of governors and proactive community leaders. My name is
2 Dufirstson Neree. I'm here representing The Credit is
3 Due Project, a community development financial
4 institution in Miami, Florida, and the Little Haiti
5 Community Alliance, a coalition of 24 community-based
6 organizations and 1,028 residents united to fight
7 redlining in the city of Miami.
8 I got here early this morning, 1:00 precisely.
9 The tickets was bought with the pooled savings of ten
10 local residents, each making solely $10,000 for the
11 entire year. I'm sure if a public hearing was advertised
12 in the state of Florida, many other community groups
13 would have made the same type of effort.
14 Not knowing the specifics of this public
15 hearing, I have prepared a 15-minute and a 30-minute
16 presentation, but out of respect for your time and
17 respect for local groups in San Francisco, I can
18 succinctly limit my presentation and just summarize
19 NationsBank record of poor lending, poor community
20 outreach, and failure to comply with the CRA and with the
21 following censuses.
22 Two years ago, we had six different banks
23 operating in our community. In the past, when our
24 residents faced local bank discrimination, we could take
25 our money elsewhere or we could use the CRA to protest
26 the poor services that we received. Last year, with the
155
1 merger of NationsBank/Barnett Bank, our community went
2 from having six local bank branches to having just two.
3 Now what choice do we have in terms of where we
4 decide to do our banking and what choice do we have --
5 what voice do we have in using the CRA to fight for more
6 access to capital in an area when we know that it's
7 common banking protocol to renege on CRA commitments?
8 In our community, the CRA is virtually useless.
9 The two banks who operate there now, Washington Mutual
10 and NationsBank, are two of the largest institutions in
11 the United States of America. We don't expect a merger
12 anytime soon. If you as our public officials do not
13 force these mega-banks to make enforceable CRA
14 commitments, low-income communities and minority
15 communities like mine will have no option but to become
16 the punching bags for mega-banks like NationsBank, who
17 have in the past showed very poor records of community
18 reinvestment act lending.
19 MS. SMITH: Thank you. I encourage you to
20 submit your 30-minute presentation for the record.
21 MR. WONG: Members of the Federal Reserve, my
22 name is Dennis Wong, and I'm the president of the Asian
23 Business Association, Northern California. We're a
24 nonprofit and we focus on economic development through
25 education. As part of that, we sent nine of our members
26 to the White House conference on small business in 1995
156
1 to address many of the issues that you hear before you
2 today. We'd like to also lend our concerns to the
3 proposed merger by saying that without specific
4 commitments from the new NationsBank and without
5 identifiable measurable results, we are very concerned
6 that the effectiveness and the intent of CRA will be
7 greatly diminished. Thank you.
8 MR. GNAIZDA: Members of the panel, we now have
9 a series of one-minute speakers who will be using the
10 mic.
11 MR. BETZ: We promise to be extremely brief.
12 We're representing a number of organizations that wanted
13 to be here today but, because of the cost of getting to
14 San Francisco, were not able to. So we'd like to make
15 brief statements on their behalf.
16 I'm going to start with a statement from Leo
17 Avila, who's a member and former past chair of the
18 American G.I. Forum. And he wants to go down on the
19 record the following statement: "The American G.I. Forum
20 is our nations most prominent and largest Hispanic
21 veterans organization. We oppose any merger that fails
22 to ensure that the Latino community, a community that put
23 America first in every war, fully and specifically
24 benefits from this merger.
25 "We want home loans, we want business loans, and
26 we want the banks to move their charitable dollars from
157
1 the ballet to the barrio. Until there are specific
2 commitments, we say to Chairman Coulter, McColl, and Alan
3 Greenspan no merger. Remember, the Latino community is
4 the future for California and any bank that operates
5 here. Thank you."
6 UNIDENTIFIED SPEAKER: Good morning. I'm
7 speaking here on behalf of George Dean, the CEO and
8 president of Phoenix Urban League. The Phoenix Urban
9 League has had a very good relationship with the B of A.
10 However, we must, no matter what the risk, set forth our
11 concerns.
12 First, NationsBank may not be as sensitive to
13 the unique minority cultures in Arizona.
14 Second, all the major banks in the west have
15 recognized a multi-billion dollar potential of minority
16 markets and set specific goals. Nations refuses to do
17 so. We ask why.
18 Third, although community groups appreciate
19 grants, it should not be noted -- it should be noted that
20 as a percentage of profits, the record of the new banks
21 is only half of its competitors such as Wells Fargo.
22 Forth, this merger should be modified to require
23 specific minority lending and contract goals and a
24 substantial charitable commitment to the under-served
25 communities. Thank you.
26 MR. GNAIZDA: Members of the board, if you
158
1 would allow us to make one little exception. Maryann
2 Mitchell has just flown in from Washington. She's the
3 national head of one of the largest black business
4 councils in the country, National Black Business
5 Council. If she could make a brief observation, we'd
6 appreciate it.
7 MS. MITCHELL: Good morning. I think it's
8 still morning. Again, I'm Maryann Mitchell. I'm the
9 president of the National Black Business Council out of
10 Silver Springs, Maryland and a business owner. And I
11 just want to say a couple of things.
12 We absolutely positively as it stands today
13 oppose this merger for the following reasons: The
14 lending practices and policies of Bank of America and
15 NationsBank, the contracting record. I'm a business
16 owner and I get called to the White House all the time
17 for them to tell my success as being one of the most
18 successful African-American business owners in the
19 country.
20 That is just -- it's outrageous that I prefer
21 doing business with the federal government rather than
22 Bank of America because it is absolutely impossible to
23 have access. It is also impossible to do anything with
24 NationsBank as far as contracting because they have a
25 22-page survey on the Internet that requires a business
26 plan for you to do business with them. This is
159
1 outrageous. It just cannot happen. So you have Bank of
2 America and NationsBank doing business with other Fortune
3 500 companies and not the community businesses.
4 I just want to also say to Bank of America and
5 NationsBank that we will advocate through our 75,000
6 members across the United States that they don't do
7 business with them, plain and simple. We will also
8 advocate to our employees that they just don't have bank
9 accounts with Bank of America and Nations. We will also
10 tell our employees to advocate to their families to just
11 close their accounts and go somewhere else because it
12 makes more sense. We will do business with people who do
13 business with us.
14 MR. CALDERA: Good morning. I'll be reading a
15 statement from Steve Soto, who's the president and CEO of
16 the Mexican-American Growers Association, an organization
17 representing over 7,000 growers in California. And my
18 name is Arquimides Caldera for the record.
19 Our association's success is a harbinger of the
20 future of the state. If we truly want California to be a
21 golden state again, banks must tap all of California's
22 minority resources, as much as Wells Fargo is attempting
23 to do.
24 The B of A/Nations pledge fails to tap this
25 potential. The result is likely to be a lack of lending
26 and economic development funds. We urge NationsBank and
160
1 Bank of America to develop specific minority lending and
2 contract goals. Until that is done, our support cannot
3 be secured and the new bank will not achieve its profit
4 goals.
5 Our association also protests the lack of
6 hearings in Southern California. Thank you.
7 MS. VENERACIAN: Good morning. My name is
8 April Veneracian for the record, and I will be reading a
9 statement for Alex Esclamado, president of Filipino
10 Political Association.
11 It seems almost incomprehensible, if not
12 ridiculous, for us to testify today on behalf of our
13 communities that Bank of America and NationsBank have
14 been less than forthcoming in their collective intent to
15 engage in a mutually beneficial partnership with our
16 communities.
17 Minorities, including the Filipino-American
18 community, represent a significant potential consumer
19 base for B of A and NationsBank and yet we are here
20 before you to attest that they have not taken a
21 definitive and affirmative stance towards tapping our
22 communities.
23 In studies of businesses discrimination
24 conducted across the country, institutional
25 discrimination has been pinpointed as the primary cause
26 of minority business failure and minority community
161
1 underdevelopment. Financial institutions in particular
2 are at the heart of those discriminatory practices.
3 We ask and urge the regulators not to allow Bank
4 of America and NationsBank to actively or passively carry
5 on this tragic legacy by not offering specific courses of
6 action for lifting and alleviating such institutional
7 barriers. Thank you.
8 MS. THRASH: Tunua Thrash, for the record, is
9 my name, and I'm reading a statement on behalf of Mark
10 Whitlock, who is executive director of economic
11 development for First AME Church in Los Angeles. It's
12 one of the largest Africa-American churches here in the
13 state.
14 "As the executive director of a major inner city
15 African-American church operating economic development
16 programs with 16,000 family constituents, I have grave
17 misgivings about an absentee landlord. Our community has
18 suffered from generations of an absentee landlord
19 neglect.
20 "You want to think about the fact when all of
21 the banks competitors, including Washington Mutual and
22 Wells Fargo, have made specific minority pledges, one has
23 to wonder as to the motives of the one who refuses.
24 "Third, many members of our church would like to
25 testify but cannot be here today because the hearings are
26 held in San Francisco. Please hold a Los Angeles hearing
162
1 as we previously requested.
2 "The African-American market nationwide is over
3 $600 billion. Those who ignore us do so at their peril.
4 We come not to the table to beg but with the desire to
5 create civil and a prosperous society. Thank you."
6 MS. DIAZ: Good afternoon. My name is Haydee
7 Diaz, and I am reading a statement from Willis White,
8 California Black Chamber of Commerce.
9 "I join with the National Black Chamber, the
10 Black Business Association, and the National Black
11 Business Council in criticizing a merger that abandons
12 the African-American community. We have never shared in
13 either bank's loan pool or contract program, nor in
14 Golden Parachutes for senior, white males worth over $200
15 million, nor have we equitably shared in their economic
16 development projects.
17 "Consider this: Bank of America alone lent more
18 to South Korea, $3.1 billion to be exact, than the total
19 it has lent African-American-owned businesses over the
20 last 50 years. And remember, B of A has lost $3.1
21 billion in South Korea and nothing in the inner city.
22 Until they show us the money and walk the talk, we will
23 criticize this merger."
24 MS. VILLANUEVA: My name is Trina Villanueva,
25 and I will be reading a statement from Mateo Camarillo,
26 who is the vice chair of the Chicano Federation of San
163
1 Diego. He could not fly up here today.
2 "No bank mega-merger should occur without
3 specific minority and geographical pledges. In San
4 Diego, over 40 percent of the county are minorities and
5 the majority of potential homeowners and small business
6 entrepreneurs are persons of color.
7 "We in San Diego invite CEO McColl to visit us
8 and pledge that the new bank will set specific minority
9 lending and business goals just like Washington Mutual,
10 Wells Fargo, and the Union Bank of California. Until
11 this is done, competition may decide the financial fate
12 of this merger. Why should we do business with a bank
13 that ignores us when Wells and WaMu courts us? Thank
14 you."
15 MS. NGUYEN: Hello. My name is Vy Nguyen, and
16 I'm here to read a statement from Mai Cong, CEO of the
17 Vietnamese Community of Orange County, Incorporated.
18 She writes, "The Vietnamese-American community
19 has been inadequately served by B of A's small business
20 lending and fears an absentee landlord with little
21 knowledge of our culture will do even worse. Frankly,
22 only targeted minority marketing and goals as recently
23 set by B of A's competitors, such as Union Bank, can
24 correct this lack of capital to an emerging U.S. market
25 that is far greater than many overseas markets.
26 "On behalf of Orange County's 160,000
164
1 Vietnamese-Americans, I wish to deliver a personal
2 message to Chairman Greenspan with whom I recently met.
3 Don't forsake us. Compel NationsBank to set specific
4 minority goals for small business lending and to promote
5 people of our community into senior management. Thank
6 you."
7 MR. ROMERO: Good morning. I'll be reading a
8 statement on behalf of Reverend James H. Daniel, Jr.,
9 chairman and CEO of 21st Century Partnership.
10 "The 21st Century Partnership is a nonprofit
11 community development corporation concerned with many
12 issues pertaining to community development here on the
13 east coast. Among them is the changing face of the
14 financial service industry. As ministers and servants to
15 the community, we believe that mega-mergers must create
16 concrete results for the traditionally under-served.
17 "The CRA record of NationsBank is a concern to
18 us. Its lack of commitments to those who led the
19 struggle for economic justice as represented by Martin
20 Luther King, Jr. is appalling. And we serving in the
21 interests and voicing the concerns of millions of
22 African-Americans decry the Federal Reserve's Board of
23 Governors refusal to grant us in a hearing in each state
24 in which NationsBank and B of A have failed to render
25 adequate financial services to the under-banked among
26 us. Only a lack of funds has prevented us from
165
1 personally testifying.
2 "Respectfully, Reverend James H. Daniel, Jr."
3 MR. CALDERON: Gene Calderon. And I'll be
4 reading in a statement from Burt Corona, the executive
5 director of the Hermandad Mexicana Nacional.
6 "I offer this testimony on behalf of the nations
7 largest immigrant service center and advocacy
8 institution. We have offices in Washington D.C., New
9 York, Illinois, as well as in California. This merger
10 could be harmful to all communities. It's particularly
11 so for low-income, immigrant, and minority communities.
12 "Over the last six decades, we have witnessed
13 the danger of absentee landlords and those that view the
14 poor from afar. I refuse to testify so that my personal
15 absence is evidence against Chairman Greenspan's decision
16 to prevent low-income persons from voicing their
17 concerns. Unless they live in the San Francisco area or
18 have a rich uncle bank to fund their trip.
19 "I also question the safety and soundness of a
20 bank which lacks the confidence of persons of color. We
21 constitute two-thirds of Los Angeles county's population,
22 a population greater than that of North Carolina. Thank
23 you."
24 MR. FERRAH: My name is Freddie Ferrah. I'm a
25 special project manager with the Greenlining Institute
26 and I wanted to just say with all the respect I can that
166
1 I am amazed and appalled at the fact that the nations
2 largest two-bank merger -- I don't count Citi and
3 Travelers because Travelers isn't a bank. Well, not yet
4 anyway. It will be as soon as that's complete. But
5 nonetheless, that the largest banking merger, $560
6 billion of capital, only allows -- and the Federal
7 Reserve and Mr. Greenspan should really consider this --
8 is only having one meeting, one meeting in San Francisco
9 to allow city -- or community members and groups to voice
10 their concern over something of such monumental
11 importance. This bank is going to cover a third of all
12 the states in the nation, yet only one city is going to
13 be the center point for community-based comments.
14 The banks have proven and the testimony here
15 just reinforces the fact that Nations has done about as
16 bad a job at serving the communities it works in as any
17 bank could possibly do.
18 I am here to represent 49 million people with
19 disabilities, people who I hope can understand and
20 realize the negative impact of this kind of merger and
21 will quickly, as I have already done, move the account
22 from Bank of America to a bank that supports our needs.
23 I don't want to take up any more time because
24 the real beef isn't here. Coulter, McColl, and
25 Greenspan, I don't know where they're at, but they're
26 probably unpacking Golden Parachutes or doing what it
167
1 might be that people of high importance do. I just wish
2 they'd show us more respect because there are a lot of
3 people that are very concerned with this merger. And it
4 certainly isn't taking place in any way that makes me
5 feel any more respected at all. I oppose this merger.
6 Thank you.
7 MR. FREEMAN: My name is David Freeman. I
8 represent the Commission on Disability in Berkeley,
9 California.
10 And to be honest, I really have never heard such
11 a ridiculous statement about a bank such as nations in my
12 life. I think it's pretty depressing pretty much when
13 you look at the future of banking in this country if this
14 merger is allowed to go through, especially with these
15 two banks.
16 There needs to be definite specific arrangements
17 so that the community does get reinvestments back into
18 it. As a disabled person, as an African-American, I know
19 that the system was not built with me in mind, but I
20 definitely intend to partake in it no matter what entity
21 may put itself up against me.
22 NationsBank and Bank of Atrocities needs to be
23 notified that we're entering the year 2000 and the
24 disabled community in particular is not going to stand
25 for the garbage. I think this is all garbage. I don't
26 have any beautiful words to put it into. I'm just going
168
1 to say it plain and simple.
2 This is nonsense. And if the Fed does not
3 enforce what's already on the books or if the Fed does
4 not make sure that these two banks invest in the
5 communities that they set up ATM's in and they withdraw
6 money from like an endless vacuum, what do you expect to
7 happen?
8 I'm dead against this merger. This merger
9 should not happen. If it does happen, it's just another
10 sign of the times that the Federal Reserve is kind of
11 schizophrenic. Okay? It's not facing reality, and
12 that's just the bottom line. I'm against the merger.
13 Thank you.
14 MR. GNAIZDA: Members of the panel, we want to
15 thank you all very, very much from the approximately 70
16 speakers on the two panels that you arranged with Joy
17 Hoffman's assistance. Although we obviously have
18 expressed displeasure at the lack of hearings, I think
19 all of us owe you a debt of gratitude for being as
20 flexible as you have been and as courteous as you have
21 been and as open. So we thank you very much.
22 MS. SMITH: I, in turn, want to thank everyone
23 who presented testimony this morning. You have provided
24 us with important information, and I want to assure you
25 that as part of the record that the board will have when
26 it makes its decision on this application, the board will
169
1 review the materials that you have presented and will
2 take into account the concerns that you have expressed.
3 So thank you very much.
4 MR. GNAIZDA: Thank you.
5 MS. SMITH: We will continue with -- we're
6 behind schedule, but we're going to continue with the
7 next panel before taking our lunch break, which may be
8 shorter than the half hour we had allocated. But if the
9 next panel will come on up, then we will proceed
10 immediately.
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
170
1 MR. MARKS: Hi. My name is Bruce Marks. I'm
2 the Executive Director of the Neighborhood Assistance
3 Corporation of America. We are a nonprofit housing
4 services, housing advocacy organization.
5 I am going to keep my remarks short and then
6 have a few other people talk. One thing with the Fed,
7 let's be clear, ISB, I get my experience in two ways
8 with the Federal Reserve. One, I used to work for the
9 Federal Reserve Bank of New York. It dealt with CRA.
10 So it ain't real. It's cosmetic. Let's be clear on
11 that. From an insider's point of view, this is Ragtime.
12 Secondly, the only way that you can get their
13 attention is if you take them on right between the eyes.
14 When we asked the Fed to look at Fleet Finance, which
15 was one of the most predatory lenders in the country,
16 the only way to get their attention was to blockade the
17 Fed, meet with the Board of Governors in the board room
18 and then make sure the switchboard couldn't operate,
19 because thousands of people called the switchboard at
20 one time and Alan Greenspan couldn't get an outside
21 line.
22 So let's be clear where the Fed stands.
23 Now, in terms of the NationsBank/Bank of
24 America merger, we are absolutely in support of it. We
25 are absolutely in support, because it's unprecedented,
26 when you have $350 billion.
171
1 So what we've heard here this morning is,
2 well, is it real? Is it just a nice big number that is
3 too hard to requantify and does not -- whether it's
4 real.
5 So what we've asked is some of the thousands
6 of homeowners who have benefited from what NationsBank
7 has done to come here and talk about what's going to
8 happen, not just in Charlotte and Jacksonville and
9 Memphis and in Atlanta and Washington and Boston and
10 around the country, but what's going to happen on the
11 west coast as well.
12 So, with that, let me introduce Mayo
13 Thunderbird. Mayo, he is from Atlanta and he is a
14 person who has not only purchased a house but has
15 renovated. He can say it much better than I can.
16 MR. THUNDERBIRD: Good morning. You know,
17 I've sat in here this morning and listened to a lot of
18 people express a lot of different opinions. And, you
19 know, everybody has a right to an opinion, but I'm going
20 to let you draw your opinion from my experience.
21 See, seven years ago, I was that homeless
22 person on the street you might have passed on your way
23 here. I was that person sleeping in the stairwell of
24 the gutter and wherever I could find a place.
25 And then I decided to make a change in my
26 life. And, as a result of that, when I put my life back
172
1 together, got married and had a small child, then I
2 approached other lending institutions about, well, now I
3 need a home to provide for my daughter.
4 The majority of them turned me away. Some of
5 them said, "We'll get back to you, you've got to do all
6 this." Well, they wanted all this money I didn't have.
7 So my wife and I heard about the NACA
8 program. We went to the NACA program. And, even though
9 I had a bad credit history, bad check history, because
10 the bad checks and things I did to support my addiction,
11 my wife had a bankruptcy due to some certain situations
12 that occurred in her life, they helped us work through
13 the application process to the point where, when we
14 presented it to NationsBank, it was fine.
15 And I have experience with the NationsBank
16 process that tells me that what they say they're going
17 to do, they're going to do. I went to a rally when NACA
18 came to Atlanta. There was thousands of people. I told
19 my wife there is no way we're going to get into this
20 process, there is just too many people. God willing, we
21 did.
22 I said, further on, there is no way we're
23 going to get through this process, all the bad checks I
24 wrote, your bankruptcy, but we did.
25 And then when we got to the part where you
26 presented the application to the bank, that's where the
173
1 biggest surprise was. The people in the NationsBank
2 Mortgage Corporation office were more cooperative than I
3 could have ever imagined. They helped us through the
4 difficulties, they helped us bring down the roadblocks
5 that were in the way.
6 See, they didn't have to do that. We went to
7 them asking them for help. They turned around and they
8 helped us. So I say to you that's what you should be
9 paying attention to. What is the experience that people
10 have had that have gone through the process that
11 everybody is concerned might not be real? Well, it's
12 happened, I'm living proof of it today.
13 So maybe that's where you should be focusing
14 a little bit more of your attention, talk to the people
15 you are talking to, listen to people in positions of
16 authority in the charge of organizations that are
17 designed to help the people get below that to the people
18 that have benefited.
19 If they tell you it works, then I think your
20 responsibility is to see that they live up to their
21 word. They said they were going to do it in Atlanta,
22 they did.
23 Thank you.
24 MR. MARKS: What Mayo didn't -- there is a
25 lot to say, he purchased a house and he renovated it.
26 One of the important parts of what NationsBank does is
174
1 you can purchase to stabilize your neighborhoods.
2 Let me introduce Jenny McNabb. Ms. McNabb
3 had 12, she'll tell you, she had a predatory loan and
4 it's a story that you've got to hear because she is just
5 one of thousands of people who are going to be able to
6 get out of a predatory loan into a mortgage that they
7 can afford.
8 MS. McNABB: My name is Jenny McNabb and I
9 live in Atlanta, Georgia. Several years ago I obtained
10 a mortgage from Ford Consumer Finance. This was a
11 15-year mortgage at 12.4 percent interest with a balloon
12 note at the end of 15 years of over $47,000.
13 I was told after a few months that this was
14 indeed a very bad loan and they would be willing to
15 refinance me at a cost of over $5,000.
16 When I retired a little over a year ago, it
17 became increasingly hard to make mortgage payments,
18 utilities and other household bills. I was at the point
19 of almost losing my home when I was introduced to NACA.
20 NACA not only refinanced my mortgage at 6.5
21 percent through NationsBank, but also paid off some of
22 my outstanding debts. The insurance and taxes are
23 included in my monthly payments, which was not the case
24 with Ford.
25 I feel that without the help that I received
26 from NACA and NationsBank, I would have lost my home.
175
1 And I would recommend the refinancing at this time.
2 Thank you.
3 MR. MARKS: So you keep hearing about
4 NationsBank credit, but you don't know about the other
5 side. You don't hear Jenny McNabb. You don't hear
6 again about the thounsands of thousands of people that
7 will get out of the loans by Ford, which is the largest
8 predatory lender in the country.
9 Let me introduce a first-time home buyer, let
10 me see, Naomi Martin. She's not only a first-time home
11 buyer, but she knows about all the NACA deals in
12 Washington
13 MS. MARTIN: Good evening, everyone, my name
14 is Naomi K. Martin and I'm from Washington D.C. I'm a
15 first-time home buyer. Several years ago I decided that
16 I wanted to get a loan and I went to several other
17 institutions and I could not get it, not because I had
18 bad credit, because I had no credit. And all of you
19 know, having no credit, is worse than having bad credit.
20 So I went through the program, the NACA
21 program. The way I heard about it is because I dealt
22 with the NACA loans, and I've seen people go in there
23 and I've seen them get a rate at 6 percent, 7 percent
24 and I said to myself, no, no, this is not, this is not
25 true. But by me working in that program and working
26 with NationsBank, which NationsBank want you to have a
176
1 home, I seen that this can be done.
2 I wanted to get a home where I had did my
3 roots, which is in Anacoco, and I got it there. I did
4 neighborhood community work there. I was an ASC
5 Commissioner, orange hat, and this is where I decided to
6 buy my home, and I went through this program and I went
7 with NationsBank, and I'm telling you today I am a
8 first-time home owner.
9 And I am truly proud to stand up here and say
10 that if you want to become a first-time home buyer, go
11 through the NACA NationsBank program and I'm telling
12 you, you will get your home. It all depends on you
13 yourself. If you want a home, NationsBank says, "We'll
14 supply you with a home."
15 Thank you.
16 MR. MARKS: Let me introduce the Hawkins, the
17 Freddie Hawkins, which are again one of thousands of
18 people who have benefited from what NationsBank has
19 done.
20 MS. HAWKINS: Our name is Freddie and
21 Caroline Hawkins. We are from Charlotte, North
22 Carolina, and we got a home from NACA/NationsBank. Our
23 stories are short. We are a one-job family. I work.
24 My husband is disabled, he cannot hold a job, not for an
25 hour.
26 And, when we decided to buy a home, we were
177
1 introduced to this program by a friend who had went
2 through the program, but she was just too lazy to do
3 anything else. So, when we went in, we gave them
4 everything that we had. They helped us out. They are
5 not like other companies who says, "Get yourself
6 together then come back."
7 They're not like one company, we had a friend
8 worked for this loan company, he wanted to put us in a
9 certain neighborhood. You know, not where you want to
10 be, where they want you to be. When we heard about
11 NACA, we went through it and they put us in a nice home.
12 My husband was in the hospital when it was
13 time for us to have our meeting. So he told the doctor
14 he had to get out so we can go back and get our house.
15 We started April the 24th of last year and on
16 Labor Day weekend we moved into our home. And it's the
17 home that we dreamed about and that we wanted. I always
18 told people that I wanted a three-bedroom, two-bathroom,
19 double-car-garage house. I didn't get exactly that, but
20 I have enough land to put my double-car-garage on and my
21 other bathroom.
22 And we have been adding to our house, which
23 makes it so much better. We have been living not quite
24 a year. We added on to our house, we built our own
25 deck, our own back porch, we have a little garden in the
26 back. This all came possible through NACA.
178
1 As I said, we couldn't get a loan anywhere
2 because we are a one-member working family, other
3 creditors looked at that as being disqualification,
4 because of just one person working.
5 I highly recommend NACA. As I was telling my
6 people when I was getting ready to go, I was talking to
7 them and they was, "Why are you going all the way to San
8 Francisco to talk to people about NACA? Talk to us." I
9 said, "As soon as I get back, I'll talk to you."
10 We are proud of NACA and what they have done
11 for us.
12 MR. HAWKINS: My wife has said everything
13 that needed to be said. I'd like to say thank God,
14 thank NACA and thank NationsBank because they gave us an
15 $80,000 loan and my loan papers are still in the hands
16 of some bank that's still saying, "We'll get in touch
17 with you." But we're staying in our home and thank you.
18 MS. SMITH: Is this the last one?
19 MR. MARKS: I am the last one.
20 MS. SMITH: You are the last one, maybe --
21 MR. MARKS: It will be short. Keep hearing
22 of all the criticism from Consumer Union, look at the
23 Consumer Reports, this one, the one institution they
24 recommended to go to to get out of predatory loans is
25 NACA, it's not NACA, it's NationsBank.
26 We didn't hear one example of someone that
179
1 was denied credit by NationsBank or Bank of America
2 today. We heard from the executives, the staff people.
3 So the issue is whether this merger is going to benefit
4 the community or it's going to benefit the
5 organizations.
6 We're stating clearly it benefits the
7 community and that's what the CRA is all about and
8 that's why we're standing here to say it should go
9 through because thousands and tens of thousands of
10 people are going to benefit from what they're doing.
11 Thank you very much.
12 MS. SMITH: Why don't we start with you right
13 here. Name and organization, please.
14 MR. CARDONA: Yes, sir -- yes, ma'am. Good
15 afternoon. My name is Hugo Cardona. I'm the President
16 and Chief Executive Officer to SER, Jobs for Progress
17 National. We are a 501(C) organization.
18 We are the oldest and largest organization in
19 the country taking people from welfare to work. We were
20 founded in 1964, therefore, we have been 34 years
21 empowering people to leave the unemployment and welfare
22 grants and find the skills that will permit them to have
23 a productive life.
24 We have 38 affiliates in 18 states, District
25 of Columbia and Puerto Rico. We have more than 180
26 different programs in more than 91 cities. Our combined
180
1 budgets are more than $62 million.
2 Directly and indirectly, we accept a year
3 more than 400,000 individuals, 65 percent of which are
4 Hispanic. Our motto is very simple, We change minds to
5 change lives. We empower the individual to acquire the
6 skills to be master's of their own destiny.
7 The problem that we are facing today is we
8 empowering the individuals, but we are sending them back
9 to the communities where they are failing in the first
10 place and this is where NationsBank come into play in
11 our organization.
12 Our funding comes from two sources. The
13 government who permit us to take care of the present
14 needs of the minorities, and corporate America that
15 permit us the working capital to create programs and
16 initiatives to address the future needs and the problems
17 that we are facing with our minorities in technology,
18 legislation and changes in immigration laws.
19 We have more than 150 corporate organizations
20 of the 500 Fortune supporting our efforts. We call them
21 the amigos de SER, and what they provide to us is
22 funding, places of employment for minorities and they
23 provide their own people to help in our organizations.
24 In specifically, NationsBank has been an
25 amigos de SER since 1991. In this seven years they have
26 contributed more than $350,000 to our organization. In
181
1 1994 they provided $200,000 to start what we call the
2 housing program.
3 The housing program has permitted us to place
4 more than 270 individuals, like the ones that you saw
5 here this afternoon, in homes. These are first-time
6 home buyers, persons that have 80 percent or less of the
7 average income. This is our pilot program. It has
8 proven very successful.
9 Now, in partnership with NationsBank and
10 other financial institutions, we are moving forward. We
11 are creating now a house initiative that will permit us
12 to rehabilitate apartments, to build apartments, to
13 build homes where you will have 150 homes. They have
14 built in Texas, in Dallas at this moment, a secure place
15 with 150 homes. The vista is lemon scented and every
16 home has a computer. And you have the structures in
17 place, you have everything that you need. All of this
18 is financed through these financial institutions and
19 NationsBank.
20 So SER organization is very grateful to
21 NationsBank because it has permitted us to support and
22 sell to minorities. Thank you so much.
23 MR. WADDELL: Thank you very much. Good
24 afternoon. My name is Kermit Waddell. I am an attorney
25 in Charlotte, North Carolina. I am the President and
26 CEO of the Economic Center of the Carolinas.
182
1 Today I am very happy to be here to support
2 the merger between the NationsBank and Bank of America.
3 My affiliation with NationsBank began in 1992
4 as a result of a partnership forged between the bank and
5 the National Association for the Advancement of Colored
6 People, the NAACP. This was but one of the partnerships
7 NationsBank entered into to help reach its goal of
8 loaning over $1 billion over a ten-year period of time
9 to low-to-moderate- income persons and small businesses.
10 The goal was actually achieved within three years.
11 Under the partnership, I headed up the North
12 Carolina NAACP Community Development Resource Center,
13 which Tammy Hawley talked about earlier, which opened in
14 Charlotte in 1992.
15 During the life of my existence with the
16 NAACP as State Vice President and Head Attorney, from
17 1992 until October, the NAACP facilitated over $115
18 million in loans. and I told Ms. Hawley about that
19 earlier, she had given you $80 million dollars, the
20 number is $115 million. I personally facilitated $65
21 million of that through North Carolina Center with no
22 defaults.
23 I left the NAACP in October of 1997 to
24 establish the Economic Development Center of the
25 Carolinas known at the EDCC, a nonprofit NationsBank
26 partner.
183
1 Since October 1997, the EDCC has facilitated
2 over 7 and one-half million dollars. We currently have
3 over $28 million pending currently. We have over $15
4 million pending in NationsBank with over $8 million in
5 letters of commitment.
6 The purpose of the EDCC is a desire to
7 promote economic development through community
8 development lending in partnership with NationsBank to
9 community-based organizations and other institutions.
10 Our target populations and its major
11 beneficiaries of our efforts are those persons at
12 communities which traditionally have been underserved by
13 major lending institutions. We provide counseling,
14 advocacy, home ownership, first-time buying of home
15 programs and small business education classes.
16 We believe and still believe that our one
17 hundred percent lending record to this date is due to
18 the strong education program. We firmly believe that.
19 Class receive assistance in credit
20 counseling, budgeting, asset management, business plan
21 preparation, technical assistance. NationsBank provides
22 the curriculum and classroom material for the education
23 classes.
24 I think this is critically important because,
25 as an attorney for the NAACP for many, many years, I
26 took part in a great many partnerships and fair share of
184
1 agreements. One was the Carolina Panthers when they
2 were getting ready to create the Panthers.
3 Because of problems with Dennys, we created a
4 $60 million fair-share agreement. The resource center
5 has facilitated over $20 million in loans through the
6 Carolina Panthers through African Americans who
7 participated in the building of the stadium as well as
8 eight to nine jumbo loans for the players that buy homes
9 within the 5- and $600,000 range.
10 However, we just as equally satisfied with
11 the 25- or $30,000 loan to someone in the Appalachian
12 region who never had running water, never had windows or
13 someone who lives along the coast of North Carolina and
14 South Carolina in poverty-stricken communities.
15 I also want to say that we have utilized the
16 bank. A great many of the programs that are in
17 partnership with these agencies and these banks, their
18 problems are they never take time to learn the bank. We
19 have utilized every sector of NationsBank. We have used
20 the SBIC for African American businessman that needed an
21 equity partner to grow and expand their business so that
22 he could participate in a military contract.
23 We have used the consortium for an African
24 American business family who has the contract with
25 Nissan to produce all of the chimes for the Nissan
26 automobiles. So I can tell you from firsthand
185
1 experience that this program is not racial placation,
2 that the partnership with NationsBank works. I think
3 that people have to make it work, you have to stop
4 looking for a gift and for a handout and you have to put
5 yourself to work and the partnership works.
6 To conclude, I'd like to leave with you the
7 words of Frederick Douglas, which is the motto of my
8 office. "The history of civilization showed that no
9 people can or will rise to the degree of mental or even
10 moral excellence without wealth, a people uniformly poor
11 and compelled to struggle for barely physical
12 independence and be despised by their neighbors and will
13 finally despise themselves."
14 Thank you and God bless you.
15 MS. SMITH: Thank you very much.
16 MR. LUJAN: Thank you very much for allowing
17 me to speak on behalf of NationsBank and BankAmerica.
18 My name is Edward Lujan. I am from Albuquerque, New
19 Mexico and have been quite active in community affairs
20 for both Albuquerque and the state for number of years.
21 Presently I serve as the Chairman of the
22 Economic Development Commission for the State of New
23 Mexico and as chairman of the New Mexico Hispanic
24 Cultural Center Board.
25 I support the acquisition of BankAmerica by
26 NationsBank. The bank has been in existence for 70
186
1 years, as the bank grew, it helped the city and the
2 state grow both with employee activities and its
3 resources.
4 I am delighted to say that NationsBank has
5 continued the tradition of what was originally
6 Albuquerque National Bank.
7 Time doesn't permit me to go over all of the
8 employees of NationsBank who are active in the
9 community, but two come to mind immediately. David
10 Baird is President of NationsBank New Mexico, belongs to
11 the Albuquerque Economic Forum, Albuquerque Economic
12 Development Board and Leadership New Mexico.
13 Alex Romero is Executive Vice President and
14 Consumer Banking Executive. Alex belongs to the
15 Hispanic Cultural Foundation and also presently serves
16 as Chairman of the Board of Albuquerque Hispano Chamber
17 of Congress.
18 When it comes to economic development,
19 NationsBank is right there helping with both their
20 employees and their resources.
21 I previously mentioned that I was chairman of
22 the board of the New Mexico Hispanic Cultural Center. A
23 few of us started with a dream of building a national
24 cultural center to share and preserve a unique culture
25 for a nation.
26 Our goal was to reach $45 million for this
187
1 endeavor. We started working going to the state
2 legislature and securing 16 million in funding and
3 creating a division within the Office of Cultural
4 Affairs for the State of New Mexico. We went to the
5 City of Albuquerque and to Middle Rio Grande Conservancy
6 District. The city gave us 16 acres in downtown
7 Albuquerque, and the conservancy district gave us 14
8 acres of bosque or Riverside land bordering the land
9 from the city.
10 We went to our two United State Senators and
11 secured 18.9 million in federal funding for the
12 Performing Arts Theater. Having secured the cooperation
13 and funding for the city, the conservancy district, the
14 state and federal government, then we went to the
15 private sector for an additional $10 million that was
16 needed to complete the national center.
17 Without asking, NationsBank gave the center
18 the largest donation to get our private sector
19 fundraising campaign underway.
20 I have always worked with Bank of America and
21 have found them to be -- to also be good corporate
22 members of the community. Their history and their
23 commitment to both the cultural aspects and economic
24 vitality of our great state says to me that, as one
25 bank, they will continue to be involved. I wish to
26 wholeheartedly endorse the acquisition of BankAmerica
188
1 Corporation by NationsBank Corporation.
2 Thank you.
3 MR. COOPER: Good afternoon. I am the
4 President and Chief Executive Officer of Choice
5 Communications, Inc., a commercial printing operation
6 located in Richmond, Virginia.
7 Since our inception in January 1993, we have
8 grown from a customer base of one with sales of less
9 than $2 million to a company that this year will exceed
10 $5 million in sales to over 100 clients. During this
11 period, we have increased our employee role from 16 to
12 more than 50. Because I am a Black American and control
13 85 percent of the company, we are one of the largest
14 minority-owned printing operations in the United States.
15 It is not my intention to offer these facts
16 as a testimonial to my achievements as a business
17 person, but, rather, I offer them as the positive effect
18 of a decision made six years ago by NationsBank
19 executives. It was their vision that led to the
20 creation of Choice Communications.
21 During the process of deciding to eliminate
22 company-owned operations that were not directly related
23 to the business of banking, NationsBank identified their
24 Richmond printing operation as a candidate for
25 extinction. However, instead of eliminating 16 jobs and
26 selling assets for pennies on the dollar, the decision
189
1 was made to use the print shop closing to create an
2 opportunity for minority business development.
3 In announcing their intentions, NationsBank
4 promised help in securing financing and a one-year $2
5 million contract to provide printing services. It was
6 my good fortune to be the candidate chosen to purchase
7 the print shop.
8 Since that time, I have benefited from this
9 decision and Choice has remained a primary supply
10 partner to NationsBank. In fact, we have recently
11 signed a contract that will keep us in this position
12 through the year 2000.
13 During the current five-year period, annual
14 sales to NationsBank have grown annually and average
15 more than $2.3 million.
16 Finally, I would like to mention that for the
17 past two years the National Minority Supply and
18 Development Council selected NationsBank as its
19 corporation of the year. This award was given to
20 NationsBank by minority business enterprise
21 representatives from across the United States. Receipt
22 of the award is testimonial of a corporation's effort to
23 create change. To receive the award in consecutive
24 years is an overwhelming acknowledgement of
25 NationsBank's leadership in and commitment to the
26 communities that it serves.
190
1 I challenge the people of color on the west
2 coast to learn a little bit more about the NationsBank.
3 And I thank you again for the opportunity to testify in
4 support of the merger.
5 MS. SMITH: Thank you very much. I don't
6 think we have any questions, right? We will take a
7 ten-minute break, that will be our lunch break, and then
8 we will start at 12:55 with the next panel.
9 (Recess taken.)
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
191
1 MS. SMITH: I think our court reporter is
2 ready to go, and someone is going to fill in for our
3 timekeepers until our timekeepers return. We'd like to
4 go ahead. Our panel is all here and we will start with
5 Ms. Cincotta.
6 MS. CINCOTTA: My mike is on. Thank you
7 very much.
8 It's nice to be in San Francisco, but I
9 would like to really urge you that the Federal Reserve
10 Board did not end it at a one-day hearing here. People
11 all over the country want to comment on this. This is a
12 very important issue for everybody and people can't all
13 afford to get out here. Three of us shared a room
14 together to help cut down to cost last night.
15 National Training Information Center,
16 which I am Executive Director of, and National People's
17 Action, who I am chairperson of, have worked on getting
18 home mortgage disclosure passed, CRA, and then went into
19 whatever else it takes to make the market work in our
20 communities such as the Jessie Legislation, going after
21 the MI companies, insurance partners, that bring
22 together all the necessary pieces in lending.
23 When we got CRA passed, we did not think
24 the burden of making it work was going to go on all the
25 neighborhood organizations. We thought we got it
26 passed, we have disclosure and this is what regulators
192
1 all should take care of.
2 To our dismay, most financial institutions
3 in the United States get a passing grade. I think most
4 of them get -- about 95 percent of them or more get a
5 passing grade. If they all deserved it, we wouldn't be
6 in this room today, we wouldn't be arguing about banking
7 or loans, et cetera. They don't deserve it. Maybe four
8 percent, and the other 95 don't deserve it.
9 In Chicago we have monitored agreements
10 with our large downtown lenders for 12, 14 years
11 following through, following through, following through.
12 They said they would do more but the secondary market
13 wouldn't buy their loans and we heard this from
14 institutions around the country. We took it to
15 Washington to make sure that Fannie Mae and Freddie Mac
16 would work for them.
17 So we have dealt with pieces of pieces of
18 pieces. And, if we ever hear an excuse of why loans
19 can't go in, be it the MI companies -- we went after the
20 MI companies to get them as part of the lending
21 community also.
22 So I want to make sure you know we don't
23 just pick on banks. If they say they'd like to do it
24 but they need help, we're willing to do that.
25 What we're facing in Chicago, which was a
26 major -- had major banks -- some of the major banks in
193
1 the country, Chicago owned and operated. After all
2 these mergers and acquisitions take over, we're going to
3 have one bank that's Chicago owned and operated only.
4 One of the financial institutions we lost
5 years ago was Continental Illinois Bank. They wouldn't
6 loan in the community, but they lost a ton of money
7 speculating in Oklahoma in oil wells.
8 They went under, Bank of America took it
9 over. That was our first experience with Bank of
10 America. So this large institution all of a sudden
11 became a non-bank bank.
12 So any programs, anything with BankAmerica
13 had to be through NHS, through different groups doing
14 development, et cetera. But we're losing this big
15 institution you could walk in to talk to, argue with
16 about will they make loans, was lost.
17 Part of that decision was that would be
18 the non-bank bank, but the control would stay in
19 Chicago. As soon as the intra/interstate banking went
20 through, the control was moved to California. To
21 appease the regulators at that time, Bank of America
22 said they would open branches in all the Jewel Food
23 Stores. They did. It lasted two months until they got
24 approval to move the control to California.
25 So that was -- that's our experience. We
26 can work with some of the folks who were left in the
194
1 building. Again, it's all putting special programs
2 together, not walking in, making deposit, getting a
3 loan.
4 One minute remaining. Thank you.
5 All we have from Nations in Chicago is
6 something called Nations Credit which receives a
7 predatory lender, if you could find your way downtown
8 and you are willing to pay maybe 15 percent for a loan.
9 They do not have a presence of regular lending, but just
10 through a loan kind of company. So that our experience
11 with Nations and what we're hearing from the groups
12 across the country that they're interested in
13 communities or lending is pretty bad.
14 We tried getting meetings with NationsBank
15 when we were having our national conference in
16 Washington this past year. Sent letters, made calls,
17 couldn't -- our style with NPA is we had a demonstration
18 at the bank until we got to talk to somebody, because we
19 will not take no for an answer for the community. It
20 ended up that they said they would meet with us in 30
21 days in St. Louis.
22 We pulled back on any protest, anything
23 until we could have that meeting. Talked to a gentleman
24 on the phone who said he would be speaking for -- was it
25 McCoy, who is head of Nations.
26 When we got down there, and we had groups
195
1 from 12 cities, Cathy Bessant was the person who was
2 sent to represent the bank and we did not have the
3 person who I talked to on the phone, and we had
4 presented them with what we thought would be a good
5 agreement that they could do for ten years.
6 They laughed, they threw it away and
7 Ms. Bessant said -- at some point said, "We do not deal
8 with people like you," going like this (indicating).
9 "And, if you think we're ever going to deal with people
10 like you, you are mistaken."
11 And at the same time, they were touting
12 their agreement. I know I'm short of time, one more
13 sentence.
14 If you take their agreement and look at
15 their housing lending, what they say they want to do in
16 the next ten years is less than they've done in the last
17 ten years.
18 I would not believe one single word that
19 NationsBank told you, one single word of what they said
20 they're going to do. And, when you hear the experiences
21 of how they treat people in a lot of the local community
22 organizations, you wouldn't want them as your lender and
23 you wouldn't want them in your communities either.
24 So, please, have more hearings, deny them,
25 deny them, deny them until they learn how to deal with
26 people instead of being as obnoxious as they are.
196
1 I mean, I've met a lot of bankers and
2 they're not all perfect, and neither am I. This tops
3 the cake, and you would agree if you'd been there.
4 Thank you.
5 MS. SMITH: Thank you very much.
6 MS. WEBB: My name is Margaret Webb, and
7 I'm from Wichita, Kansas. I'm here today representing
8 National People's Action and Sunflower Community Action
9 from Wichita, Kansas.
10 Before I begin, I would like to tell you a
11 little bit about myself. I'm a single parent working
12 two jobs. I am live in a low-income area, am very proud
13 of my community. I'm a volunteer at our local school
14 and leader with Sunflower Community Action.
15 I'm not getting paid to be here today. In
16 fact, I took the day off from work without pay because I
17 feel in my heart that we need a national CRA agreement
18 with NationsBank.
19 I am new to this part of the banking
20 process. In May Sunflower Community Action asked me if
21 I would be interested in looking into redlining at
22 NationsBank. I wanted to see if it was happening in
23 Wichita. Just getting to see a copy of the HMDA was
24 hard work. I went to NationsBank in downtown Wichita.
25 The bank alone covers two city blocks and is seven
26 stories high. To my understanding it was always a main
197
1 bank in Kansas.
2 Anyway, I asked Marilyn Polly, the bank
3 president, if I could look at the HMDA. After some
4 stalling I found out our big beautiful downtown bank was
5 just a branch bank.
6 The only NationsBank that had the HMDA
7 information, according to Ms. Polly, was in the home
8 office in Charlotte, North Carolina. For some reason,
9 Ms. Polly had called Dallas, Texas, not Charlotte, for a
10 copy of the HMDA.
11 Now, remember, I just asked to look at a
12 copy of the information. To my understanding, CRA
13 regulations state that anyone should be able to walk in
14 the bank and look at the HMDA.
15 After more stalling, they did give me a
16 notebook with small business and farm loan data. But
17 the home loan section was empty. At first I was told
18 the bank had given us seven days to get the information.
19 Then, as I continued to press, Ms. Polly arranged to
20 have it overnighted. Imagine my surprise, when I
21 received it a few days later, on just how bad the
22 redlining is.
23 You all have a copy of it that I turned in
24 this morning, plus there is a bigger picture behind me
25 with Bank Four and Boatmen's.
26 NationsBank keeps saying that bigger is
198
1 better, but we have small to medium sized banks that do
2 a whole lot better job of home loans than NationsBank.
3 NationsBank just isn't giving home loans to low and
4 moderate income people.
5 NationsBank says that it makes pledges,
6 but an executive of NationsBank also told me that those
7 pledges aren't legally binding.
8 On May 21st, I was with a group of people
9 that sat down with NationsBank, Bank of America, in St.
10 Louis. This meeting opened my eyes to NationsBank.
11 First of all, I felt it was nothing but a stalling
12 tactic on the part of NationsBank.
13 Catherine Bessant told us at that meeting,
14 and I quote, "We, NationsBank/Bank of America will never
15 work with people like you," end of quote. I feel that
16 we people is what made NationsBank what it is today.
17 NationsBank also says that they don't sign
18 contracts, they make pledges, not contracts or
19 agreements. How can they be held accountable without a
20 mutually signed agreement?
21 There are serious problems with allowing
22 this merger to take place without making the spirit of
23 CRA -- without making sure that spirit of CRA is
24 implemented at the level they plan to grow.
25 The rebuilding of my low-income community
26 is dependent on such an agreement. National Bank,
199
1 national agreement.
2 NationsBank/Bank of America recently made
3 a promise of -- a ten-year promise. Part of that
4 promise was that they would loan money to rural America.
5 But last year, in Kansas alone, they closed ten
6 branches. Again, their talk isn't following what they
7 are doing.
8 Even if they give money to America, what
9 is it to stop them from redlining? To me it sounds like
10 they're dangling a carrot in front of us, look at the
11 money, not the redlining.
12 America wouldn't be what it is today
13 without people taking risks. The bank thinks it's a
14 risk to work with us, but in reality it's not.
15 I'm not asking for a handout. I am asking
16 to stop the redlining and give out home loans to low and
17 moderate income people. Our communities must be rebuilt
18 and the only way to do this is with a written national
19 CRA agreement
20 MS. SMITH: Thank you.
21 MR. ORTEGA: Buenos Tardes. Mi nombra es
22 Erneto Manuel [phonetic] Ortega. I forgot I'm in
23 California, English only. Sorry.
24 My name is Ernest E. Eugene Ortega. I
25 live in Albuquerque New Mexico. I have been involved in
26 low-income housing and community development work in
200
1 rural and urban New Mexico for over 30 years. I would
2 support this merger if the bank made specific written
3 and enforceable commitments that New Mexicans would be
4 better served by this merger. As Bank of America's last
5 CRA evaluation shows, national commitments don't always
6 translate into better lending for New Mexico.
7 I am alarmed by the overall trend towards
8 national -- nationwide institutions. A national
9 approach will not work in New Mexico. New Mexico has
10 what is known as the Lou Wallace effect; if it works
11 somewhere else, it doesn't work in New Mexico.
12 The Federal Reserve has a responsibility
13 to ensure that a merger of this magnitude does not
14 adversely affect the consumers in New Mexico.
15 My support for the merger would be
16 contingent on the banks:
17 Presenting specific implementation plans
18 for the 350 billion as it relates to New Mexico.
19 Presenting a specific plan for monitoring
20 the 350 billion commitment as it would impact New
21 Mexico.
22 Continuation and expansion of Bank of
23 America's Rural 2000 initiative.
24 Continuation of a Bank of America's CRA
25 Advisory Committee Structure.
26 Assurances that the divestiture does not
201
1 dilute CRA activities in New Mexico's rural communities.
2 Development of specific CRA initiative for
3 New Mexico's native American Pueblos and reservations.
4 Presentation of a plan which addresses
5 closing of the branches due to the overlapping of the
6 two banks. New Mexico is one of the states where there
7 is overlapping of the two banks.
8 What happens to minority personnel this
9 those branches? What happens to the minority consumers
10 in those communities? The other thing is how will those
11 consumers actually be served once those branches are
12 closed and how they actually occur.
13 Assurance the bank charges would not
14 escalate for moderate and low and rural consumers.
15 The CRA does not mean that New Mexicans
16 can be neglected because Californians or North
17 Carolinians are better served. We need a CRA commitment
18 for New Mexico based on New Mexico's needs, not its
19 market share as the banks have proposed.
20 The Federal Reserve and all other bank
21 regulators must find a way to make sure that national
22 banks serve small markets like New Mexico. In 1997 Bank
23 of America received an outstanding CRA rating, largely
24 based on its efforts in California, Washington and
25 Portland. But, as the OCC says, "Bank of America
26 historical commitment to the CRA has not been fully
202
1 exported to the bank's other areas. The OCC gave Bank
2 of America's lending and investments in New Mexico a
3 grade of low satisfactory. Will this always be true in
4 an era of nationwide banks?
5 The question for all of us is how can we
6 assure that we get the best of both banks from this
7 merger.
8 We don't know if Bank of America's
9 eight-month-old Rural 2,000 community development
10 initiative has produced much in New Mexico, but we
11 should honor its goals. Also, I am proud to serve on
12 Bank of America's CRA Advisory Committee, which I think
13 provides a better relationship between advocates,
14 consumers and the bank than does NationsBank's annual
15 CRA forums.
16 This allows us, as consumers and
17 advocates, on a periodic basis to come and kick their
18 nuggats [phonetic]. For those of you, nuggats is
19 glutius maximus.
20 Both NationsBank and Bank of America need
21 to create specific sub-goals for serving Native
22 Americans in New Mexico.
23 If we get a specific, enforceable
24 commitment for New Mexico, as I previously stated, then
25 I could support this merger.
26 Sunwest, NationsBank predecessor in New
203
1 Mexico, was a market leader in small business community
2 development lending, but its level of service to our
3 community appears to have declined recently. We need to
4 make sure that NationsBank, at a minimum, maintain
5 Sunwest's level of lending and investment.
6 In New Mexico, some divestiture of assets
7 would be necessary to reduce the monopoly power if the
8 merger were approved. Let's set criteria for
9 divestiture of those assets. I propose that any
10 institution assuming those assets must have a New Mexico
11 CRA rating higher of either that of Sunwest or Bank of
12 America in New Mexico.
13 If the past is any guide, the proposed 350
14 billion CRA commitment won't mean much to New Mexico. I
15 urge the Federal Reserve and other regulators reviewing
16 this application to help us create a financial system
17 that truly addresses New Mexico's credit and community
18 development needs.
19 I made some comments and my
20 recommendations in my written statement is elaborated a
21 little more.
22 MS. SMITH: We will be glad to have that
23 statement.
24 MR. ORTEGA: (In Spanish unintelligible.)
25 Thank you.
26 MR. TODEA: Good afternoon. Yati
204
1 [phonetic] from Navajo country. My name is Rockling
2 Todea. I was born and raised on the Navajo Reservation
3 in northwest New Mexico. Today I live in Albuquerque,
4 New Mexico. I have been working in community-based
5 economic development since the early '70s, and I started
6 in San Francisco then. And now I'm working in New
7 Mexico.
8 I am representing the Community
9 Reinvestment and Development Task Force, a consortium of
10 community-based organizations concerned about low-income
11 housing, community development and fair access to
12 capital. Members of our coalition have been working on
13 CRA-related issues for decades now.
14 The question before us is this: How can
15 we ensure that New Mexicans obtain the best outcome from
16 this merger?
17 First, the Federal Reserve and other CRA
18 regulators must devise a way to ensure that nationwide
19 banks serve better small markets like New Mexico.
20 Consider the following: According to the
21 Office of Controller of the Currency's recent CRA
22 evaluation of Bank of America, Bank of America made few
23 community development investments during the period of
24 study in New Mexico.
25 Bank of America's overall housing lending
26 to low income and other traditionally underserved groups
205
1 in New Mexico was substandard when compared to that of
2 other lenders.
3 Between 1994 and 1996, Hispanos, American
4 Indians and African Americans all experienced mortgage
5 application denial rates significantly higher than did
6 Anglo buyers, by all banks, even when controlling for
7 income levels.
8 Second, we strongly support a written,
9 enforceable commitment that the banks are committed to
10 changing the status quo in New Mexico. We believe that
11 approval of this merger and support from the public
12 should be based on the following conditions:
13 A written commitment to traditionally
14 underserved people who live in rural areas, inner cities
15 and who are members of groups neglected by lenders.
16 The establishment of a sub-goal for Indian
17 country that will spell out how the merged entity would
18 better serve Indian country.
19 And a divestiture plan that would assure
20 that the assets are sold to lenders with a superior
21 record and meeting the needs of traditionally
22 underserved New Mexicans.
23 Small business lending decisions are
24 usually based on relationships between a lender and a
25 small business or small farm owner. Nationwide banks
26 using national strategies cannot be depended on to focus
206
1 on New Mexico's special business circumstances.
2 In his inaugural address, President John
3 F. Kennedy said, "If a free society cannot help the many
4 who are poor, it cannot save the few who are rich." In
5 the last years since, America has undergone many
6 changes, but poverty has remained unchanged and some
7 would argue poverty has increased. Change has been good
8 for a few, but for the rest it has been the same old,
9 same old.
10 I work with individuals in groups from
11 low-income communities throughout New Mexico to help
12 them make changes in their lives. The biggest problem
13 facing these individuals is the deeply imbedded
14 institutional resistance to change, both public and
15 private.
16 For your information, New Mexico has
17 ranked 50th in the nation for the past three years in
18 level of poverty.
19 I want to share a story that demonstrates
20 an institutional discrimination within New Mexico. A
21 group of Navajo ranchers formed a cooperative on what is
22 referred as the Checkerboard area of the Navajo
23 Reservation. Their research was exceptional, the
24 business plan brilliantly conceived, the financial
25 forecast expertly supported by market research and
26 management capacity beyond question.
207
1 This Bureau of Indian Affairs determined this venture
2 was not on trust lands, therefore, the ranchers could
3 not get a BIE loan guarantee.
4 The banks, on the other hand, refused to
5 make the loan because -- simply because the land
6 property was on -- the project was on Indian country.
7 Never mind that these families, ranchers,
8 have been ranchers since the turn of the century and
9 market conditions spelled opportunity in bold capital
10 letters.
11 Banks wouldn't come near this project as a
12 matter of longstanding policy, not because it was a bad
13 deal. The government agency that is mandated to assist
14 Indians refused assistance because of outdated policy.
15 The status quo was maintained.
16 The one-size-fits-all approach to
17 nationwide banks to small business lending and minority
18 development is not the answer. The banks in question
19 have demonstrated, little, if any, capacity to serve New
20 Mexico's native American communities. They have refused
21 to commit to maintaining the level of lending to our
22 state.
23 To add to our problem, the proposed merger
24 will remove lending decisions from the local communities
25 and place it outside the state. How is the loan officer
26 located somewhere in the east or west coast supposed to
208
1 evaluate a proposal coming from New Mexico? Would that
2 loan officer understand that the value and needs of
3 Native Americans are different than their surrounding
4 neighbors? We fear not.
5 What would happen if the banks are to
6 close their branches in rural New Mexico? We are
7 worried too about declining services for traditionally
8 underserved areas and population groups, and we are
9 alarmed by the trend toward hiring freeze that is being
10 led by big banks. We are especially alarmed by big
11 banks anti-competitive practices.
12 That concludes my remarks.
13 MS. SMITH: Thank you very much, and, if
14 you had anything further, then please submit it for the
15 record.
16 MR. TODEA: I will, thank you.
17 MS. SMITH: Are you next?
18 MR. WELLS: Buenos dias. My name is
19 Robert Wells and I live in Chama, New Mexico, population
20 less than 1,000. I am an accountant and self-employed
21 consultant to small businesses in that part of the
22 state.
23 I want to express to this body of my
24 concern regarding the impact of this merger towards
25 rural America of which I believe the America I am from
26 is very typical of.
209
1 I will admit that I am not well-versed on
2 many of the issues of other communities on a national
3 scale, but I will say that I find some very alarming
4 trends in banking practices that are definitely
5 affecting the way we have done business in the past.
6 In Northern New Mexico, especially the
7 Chama Valley, the lending policies, community
8 involvement and benefits are not being addressed fairly.
9 This is of great concern.
10 This geographic area of the state consists
11 of a community bank and a NationsBank branch, which is
12 rumored to be up for sale or subject to closure.
13 The next competitive bank is 90 miles
14 away. This is rural America. Northern New Mexico is
15 also the home to Jicarilla Apache Tribe, one of the
16 wealthiest Indian Nations in the country. Several
17 members of that tribe, not to mention many local
18 businesses, are not being served by our local banks.
19 I will correct myself on a prior statement
20 I just made. I will add a comment, and this is to say
21 that Norwest Bank does have a branch on the reservation,
22 but, to my knowledge, this branch was opened expressly
23 to accommodate casino operation revenues in addition to
24 some tribal transactions.
25 Four years ago, the main bank in town was
26 known to us as Sunwest Bank. Approximately two years
210
1 ago it was purchased by Boatmen's and today it is a
2 NationsBank.
3 Regarding some of the lending practices.
4 I know of a current transaction where a loan for
5 $200,000 that was made with Sunwest Bank carried a
6 15-year amortization with a three-year call and was
7 collateralized by 500-plus thousand dollars of real
8 estate. That was the only way this loan could be
9 transacted. It was normal in the past to renew notes of
10 this automatically, assuming that the payments were
11 current and had never been in default.
12 That is not the case today. That is a
13 loan that I'm involved with right now.
14 Decisions regarding this loan were not
15 only made at the branch level, but it was also made by
16 another person in the Dallas, Texas area to renew it,
17 but somebody above her out of St. Louis, North Carolina
18 said no, despite the fact of spending collateral.
19 Another example, we have very hard winters
20 in this northern part of the state. Some of the small
21 businesses need 5- to $10,000 bridge loans to carry us
22 for the next 90 to 180 days. They require excessive
23 real estate collateral. This is not fair. There are
24 many other examples.
25 It is my understanding that there has been
26 no plan to address the above issues and I don't know if
211
1 one is planned.
2 NationsBank, according to a recent
3 advertisement in the Albuquerque Journal, said that it
4 has committed $350 billion to community reinvestment.
5 To citizens of my area, we have not seen a mere
6 investment, much less reinvestment.
7 I, therefore, ask this body to require a
8 lending policy with conditions and commitments that
9 address the banking needs of rural America as a
10 condition for this approval.
11 Lastly, I pray that you not only listen
12 but you also hear my comments. Thank you, God bless
13 America.
14 MS. SMITH: Thank you very much.
15 MR. SANCHEZ: (Unintelligible Navine
16 American Language.)
17 I am J. Gilbert Sanchez. I come from the
18 Pueblo San le Fanso, located in the State of New Mexico.
19 I am here representing myself, the Mexico Alliance and
20 those that could not afford to come here today to give
21 testimony.
22 I open in my Tewa [phonetic] Language as
23 my tradition mandates of me, that is to ask permission,
24 that is by requesting permission from the Federal
25 Reserve Board to address or speak to you.
26 I spoke in Tewa to illustrate to you how
212
1 foreign the bank's and Federal Reserve's language is to
2 me and the common people of the State of New Mexico, and
3 especially to Native Americans.
4 In order to preserve time and not to be
5 repetitious, I will state for the record that I too
6 strongly support the recommendations from my fellow
7 panelists from New Mexico. Those that are present here
8 with me at the moment.
9 I also have as many stories of what has
10 taken place since the mega-mergers have come to be and
11 its impact on our state and the communities.
12 The increase in the number of loan stores
13 that loan on vehicle titles, the number of payday loan
14 shops and the decrease in the number of bank loans in
15 our communities complement each other's in many curious
16 ways.
17 The statistics are there which indicate
18 that we, the minorities in our state, are not extended
19 credit. Credit that is deserving and desired by the
20 community to support economic self-sufficiency.
21 In the bank's offer of $350 billion CRA
22 commitment, I would like to know, just like my fellow
23 panelists, how much of this is going to be coming from
24 New Mexico, especially how much of it will be committed
25 to rural New Mexico and the Native American communities.
26 Too, I will bring forth a couple words
213
1 that fears -- that sense fear through any federal agency
2 or agent. I would like to know how the Federal Reserve
3 Board is going to meet basic federal trust
4 responsibility to me and my people, a basic obligation
5 that the president is committed to at the White House
6 Conference with Tribes.
7 I would like to know how this Federal
8 Reserve Board plans to address the negative impacts that
9 mega-mergers will have and are having on Native American
10 people and tribes when mega-mergers are being allowed to
11 continue to happen.
12 As stated, the State of New Mexico, for
13 the last 50 years, enjoyed being 48th in the economic
14 standing of this country. Only recently did it drop to
15 50. When you speak of market-driven decisions, I fear
16 that New Mexico will never be in the running for any of
17 the benefits the Federal Reserve Board's decision might
18 generate.
19 I only have one additional request, and
20 that comes from our communities in North Central New
21 Mexico, the rural Native American communities, the
22 Federal Reserve Board hold a public hearing in New
23 Mexico so truly you can hear the many vast number of
24 stories that are out there pertaining to what is going
25 on in our communities.
26 We being the -- I being part of the first
214
1 Americans that came here are the least to benefit from
2 any of the economic standings or any of the economic
3 impacts from anything.
4 I live next to a colony of Californians.
5 Yes, the State of California does have a colony in the
6 State of New Mexico. The benefits that I supposed to be
7 reaping off of them, I do not see. So, when the
8 mega-mergers happen, I do not see any benefits to myself
9 personally, I do not seek them, but I would hope and
10 pray that our economic level will increase if these
11 things are brought forth.
12 Those are the only comments I have. I
13 thank you for your time. Again, would like to hear from
14 Mr. Greenspan as to how he is going to address trust
15 responsibility.
16 MS. SMITH: Thank you very much. Any
17 questions from the panel?
18 MR. FRIERSON: I would just like to say,
19 Mr. Sanchez, that the board will follow the procedure it
20 does in all of these cases in that it will look at all
21 the facts in the record, and the board will explain its
22 decision to you. Whether you agree with it or not, the
23 board will state how it has applied the statutory
24 factors to the particular facts and you will get a copy
25 of that order
26 MR. SANCHEZ: Thank you.
215
1 Just one more item for the record, I am
2 here representing myself. I do not represent any Native
3 American government or governments at this point in
4 time.
5 MS. SMITH: Thank you. If there are no
6 questions, I thank you again and we'll move on to the
7 next panel.
8 (Pause in proceedings.)
9 MS. SMITH: All right. Thank you. If we
10 can start, please
11 MR. BROWN: Good afternoon. My name is
12 Keith Brown and I am from Kansas City, Missouri. I am
13 a minister, a community activist, I am the Executive
14 Director of an organization called Project
15 Neighborhood, and the focus of Project Neighborhood
16 is to work with service providers, community groups
17 and coalitions and neighborhoods to restore
18 neighborhoods to safe, drug-free, economically-viable
19 communities.
20 One way that we feel if we're going to get
21 a real hold and grip on the problem of substance abuse
22 is really to develop the economic infrastructure and
23 commercial infrastructure of the urban core in Kansas
24 City.
25 And NationsBank, without fear of
26 successful contradiction, marvelous things have begun to
216
1 take place in our community. Because and as a result of
2 the partnership with the NationsBank under the
3 leadership of the regional president William, Bill,
4 Nelson, a Rainbow Coalition has developed. For the
5 first time, people of color, clergy, community
6 activists, city planners, civic leaders, have gathered
7 themselves around the table to really -- not only to
8 discuss but to strategically plan on how are we going to
9 rebuild the infrastructure, the economic infrastructure
10 of the urban core of Kansas City, Missouri.
11 What has taken place is that we have had
12 the opportunity to go on tours in the community to see
13 what some of the problems and the concerns are relative
14 to redevelopment and development. For the record, I
15 have a video that, you know, illustrates that as well as
16 a pictorial presentation that illustrates that. I'm
17 going to turn that in.
18 We feel that if NationsBank -- they have a
19 marvelous track record, and if they have been able to do
20 what they are embarking on in our community in terms of
21 really enhancing the viability and the aspirations of
22 that community, if they can do that by themselves, then
23 we feel that a merge with them and BankAmerica will only
24 increase and enhance what we are striving and what we
25 have begun to do in the City of Kansas City, Missouri.
26 So I and we, as grass root participants,
217
1 members of the clergy, and neighborhood residents who
2 historically are left behind, are not at the table when
3 it comes to planning, when it comes to what's going to
4 take place in a community, they are at the table and we
5 are in support of this merge and we have a strong leader
6 in William, Bill, Nelson, who is the president of the
7 regional, you know, chapter, branch of NationsBank.
8 So I wanted to share that with you. The
9 proof is in the pudding right here. So we're going to
10 turn this in.
11 MS. SMITH: Thank you.
12 MS. CONEY: Good afternoon. Thank you for
13 allowing me to come today. My name is Chloe Coney, and
14 I'm President and CEO of Corporation Development
15 Communities of Tampa, Choice CDC of Tampa.
16 CDC of Tampa is a community-based
17 development corporation located the second highest
18 poverty area, only second the Liberty City in Miami. My
19 neighborhood, East Tampa, which is College Hill, Bellman
20 and Jackson Height has been known in the past for
21 highest decay and disinvestment.
22 Nine years ago, Alex Sinc, President of
23 NationsBank, Florida, adopted our blighted, distressed
24 neighborhood, East Tampa. NationsBank pledged their
25 support by working with our Mayor's Challenge Fund
26 Housing providing loans to low-income families.
218
1 NationsBank branch office is located in
2 our community and provides excellent service to the
3 residents. The six years of CDC Tampa, Inc. existence,
4 NationsBank has been a strong partner.
5 NationsBank has provided leadership to our
6 community through their staff with countless hours of
7 volunteering. Joe Vickersian, Mary Ellen Camilla serves
8 on my board, and, now, Mary Beth Stoltz, who is with
9 NationsBank CDC.
10 One of NationsBank employee won the
11 community service award and donated our CDC as a
12 nonprofit.
13 Our community-building project, the NEMY
14 [phonetic] community building brick by brick is located
15 in the worst of the worst neighborhood, the drug
16 affected neighborhood. You all know what I'm talking
17 about in the inner city.
18 We are rehabing old laundromat, rehabing
19 old bar, and we're going to do an indoor-outdoor food
20 market. NationsBank stepped to the plate and made a
21 financial contribution.
22 Many of the banks did not want to take
23 that kind of risk. So, again, I'm excited about
24 partnering with NationsBank CDC to build the first, the
25 very first, multi-family housing, a $2 million project,
26 in East Tampa in over 30 years.
219
1 We're also looking forward to building new
2 single-family housing in our blighted, distressed area.
3 Tampa, Florida, East Tampa neighborhoods
4 is like Atlanta, Georgia, Summerhill and the black
5 historic district. We want to continue to work with
6 NationsBank CDC to rebuild and create a strong, safe
7 prosperous, wealth building community.
8 As with the merge of Barnett Bank in
9 Florida, I challenge nonprofit organizations located in
10 blighted, distressed neighborhoods to sit at the table
11 to represent your neighborhood.
12 Again, NationsBank has been there for our
13 poor inner city neighborhoods. I do recommend the
14 merger and I will be sitting at the table. Thank you.
15 MS. SMITH: Thank you.
16 MR. PRICE: Thank you. Good afternoon, my
17 name is Hugh Price. I am President of the National
18 Urban League headquartered in New York City. We were
19 founded in the 1950s to assist African Americans who
20 were making the transition to rural cities. Today our
21 goal is to help African Americans and other people with
22 color to become self-reliant and equal citizens under
23 the law.
24 Through our economic self-sufficiency
25 agenda, the Urban League developed partnerships with
26 national institutions like NationsBank. As a result of
220
1 these relationships, the Urban League is in a key
2 position to discuss recommendation of performance and
3 commitment in serving color.
4 We support the merger of NationsBank and
5 Bank of America because we have a long history in
6 partnership with NationsBank. Through this partnership
7 we have seen NationsBank commit to ensuring that African
8 Americans and others of color have access to credit and
9 communities that are highly available.
10 I'd like to highlight the record of
11 NationsBank's performance first. President of Community
12 Initiatives, Cathy Bessant, testified before Congress,
13 Senator DeMoto, along with community groups on the
14 strength in maintaining the Community Reinvestment Act.
15 It was unique to find a lending
16 institution willing to sit on the same panel with
17 controversy groups and offer support and testimony on
18 behalf of CRA. This act is a commitment to extending
19 credit to those who have been traditionally neglected.
20 Second, NationsBank commitment to the
21 prevention and eradication of differential treatment at
22 the branch level. Through its mystery-shopping
23 initiative, NationsBank conducts self-testing at the
24 branch level to detect patterns of differential
25 treatment by its own employees. We think that
26 NationsBank's interest in policing itself demonstrates
221
1 foresight, and that is another reason why we support its
2 application to merge.
3 Third, the bank has made a commitment to
4 lend $10 billion over the next ten years to underserved
5 communities. Within a four-year period NationsBank has
6 not only met its commitment but exceeded it by providing
7 $13 billion to communities. We are confident the bank
8 will exceed its $350 billion commitment to underserved
9 communities.
10 Fourth, NationsBank pledged to provide $25
11 million to community development financial institutions,
12 through its own CDFI fund. Again, NationsBank showed
13 courage and commitment when it announced the
14 establishment of its CDFI fund on the same day that
15 President Clinton signed the federal CDFI fund law. It
16 was NationsBank's view that their fund would complement
17 the Federal Government's effort to finance CDFIs. We
18 view their announcement of $25 million CDFI fund as
19 another sign of its commitment to increasing access to
20 credit for traditionally underserved communities.
21 Fifth, NationsBank held BluePrint 2000.
22 This was a convening of nearly 500 community leaders
23 from 111 urban and rural communities across the country.
24 The event marked a -- served as a retreat and think tank
25 for community groups to seriously ponder the viability
26 of their neighborhoods.
222
1 Finally, let me add that NationsBank has
2 been very aggressive in advancing African American
3 executives up the ladder into positions of
4 profit-and-loss responsibility for major business units.
5 Its impressive track record could be and should be
6 emulated by other financial institutions.
7 We strongly support the continuation and
8 extension of the Community Reinvestment Act. We think
9 there is much more work to be done in this country on
10 rebuilding low-income neighborhoods and the commitments
11 must be strong and firm and must be even bigger than
12 ever before.
13 We look forward to seeing the lightened
14 philosophy of NationsBank extent throughout the entire
15 footprint of the new bank. We believe that the new bank
16 offers the opportunity for unprecedented economic growth
17 in communities that we serve and as a result the new
18 bank will create new venues for venture capital, will
19 enhance the level of mortgage credit to low-income
20 communities and will help revitalize economically
21 distressed neighborhoods.
22 Again, we support the proposed merger.
23 Thank you.
24 MS. SMITH: Thank you.
25 MR. PEDRON: Good afternoon, and thank you
26 for the opportunity to present testimony before you
223
1 today. My name is Eduardo Pedron. I'm the president of
2 Miami Dade Community College in Miami, Dade County,
3 Florida, serving 127,000 students.
4 I'm here today, though, to present my
5 community perspective on this issue. I most agree that
6 when mergers of this magnitude take place none of
7 society in concern develop in the various communities
8 throughout the nation. Such was the case when
9 NationsBank acquired Barnett Bank, Florida's largest
10 bank. The level of inciting our community was very high
11 and I have to confess that I myself had serious concerns
12 about it.
13 However, I think the record of NationsBank
14 during this acquisition, this merger, is one that has
15 encouraged me to support the merger with BankAmerica,
16 because I really feel that their track record has been
17 exemplary.
18 I want to be very brief and mention three
19 or four examples that I think are very indicative of the
20 level of sensitivity that NationsBank has shown in this
21 regard.
22 First of all, I have seen during that
23 merger for them to go through significant effort to fold
24 the local management into the new organization, with a
25 special attention to minority members. Both Hispanic
26 African Americans and others. This has provided for a
224
1 significant degree of continuity and something the
2 community has applauded.
3 The other aspect, which I think has been
4 significant, is the involvement in civic and community
5 affairs with a special reference to inner city issues
6 and education issues.
7 Not only has NationsBank respected
8 previous programs that were supported by the -- by
9 Barnett Bank, but, frankly, we have seen that
10 participation heightened and efforts such as Take Stock
11 in Children, which is a program throughout Florida to
12 provide and guarantee poor children the opportunity for
13 a college education, has been enhanced, and I could go
14 on and on with many many initiatives that we have seen.
15 Also something that is very indicative of
16 that sensitivity is the fact that they have incorporated
17 many of the former members of Barnett adviser, local
18 advisory boards into their advisory boards, and
19 especially minority members. And I think if the Miami
20 experience is indicative of what has happened in the
21 rest of the country, we have seen most of the former
22 members of the advisory board of Barnett Bank been
23 applauding to the NationsBank advisory board. And they
24 have gone beyond that to seek and make sure that they
25 have the support and the advice of members of the
26 community which is something that you rarely see in
225
1 terms of banking institutions.
2 Finally, I'd like to mention that the --
3 we have seen with great enthusiasm the fact that
4 NationsBank has taken the necessary step to strengthen
5 national strategic partnerships with national
6 organizations like the NAACP and the council of La Raza,
7 the Urban League and many others. So I feel this is a
8 good sign.
9 For a state such as Florida, and there are
10 other states, which Bank of America has not had a
11 significant presence, this is something that our
12 community is welcoming, in my opinion, because you take
13 a state like Florida with a very strong and growing
14 business activity in the whole area of international
15 trade and finance and with Bank of America
16 well-established presence throughout the world, we feel
17 that this will be to the benefit of our economy and to
18 the benefit of businesses that are involved in
19 international trade and finance.
20 So I'm here very gladly to support this
21 merger and pleased to do so at this time. Thank you.
22 MS. ROBERTSON: My name is Ellen Robertson
23 and I'm from Richmond, Virginia. and I'm the Executive
24 Director of HP Wrap which is a nonprofit community
25 development organization. I'm also a partner with
26 NationsBank in the development of a target neighborhood
226
1 development program in the community by the name of
2 Highland Park.
3 I'm honored to be here and to participate
4 in this public hearing on behalf of NationsBank and to
5 also have this great opportunity to express our thanks
6 for the services that NationsBank has provided in the
7 development of that community.
8 We especially want to recognize bank
9 leaders Doug Crukshank, James Jackson, Marsha Woody and
10 Cindy Mimms for their outstanding leadership and
11 demonstration of their interest in community
12 reinvestment. It's because of the services that they
13 have provided that I am confident that this merger is in
14 the best interest for all parties at stake.
15 I'd like to first give you a general
16 overview of the community that I'm speaking of. It's an
17 urban community that is located in the heart of Richmond
18 that is home for about 8,000 residents, which consists
19 35 percent of very low income, 50 percent single family
20 head of household and the remaining largely blue class
21 homeowners and renters.
22 In 1989 a group of residents in which I
23 was one of formed this nonprofit HP Wrap for the purpose
24 of revitalizing the community. NationsBank at that
25 time, a sovereign bank, was the first to come to our
26 support. They have served on our board since that time
227
1 and supported us to be the first organization in the
2 United States to influence HUD to provide first-time
3 grants to qualified buyers to purchase their first home.
4 Today this is a national program.
5 Since 1989 until today, nine years,
6 NationsBank support in providing home purchase training
7 has resorted in 342 new families having purchased their
8 first home in Highland Park. I'd like to thank
9 NationsBank. Highland Park has more than
10 2,000 homes, most historic two-story Victorian homes
11 with 2,000-plus square footage of space nested on large
12 lots and accessible by tree-lined streets.
13 Due to the block busting and redlining of
14 the -- in 1960 transition resorted to flight and we are
15 now living are blight. More than 300 homes are
16 abandoned in this community. NationsBank supported HP
17 Wrap purchasing and restoring one of these abandoned
18 homes to serve as the neighborhood model Victorian sales
19 center to market a historic restorated development plan.
20 NationsBank provided the funds to restore
21 the model, to serve as the center and completed the
22 furnishing. Due to this creative investment, we now
23 sell an average of 15 restored abandoned homes to
24 first-time buyers. NationsBank invests 65
25 to 75 percent of the total development cost using very
26 workable flexible terms and lines of credit for
228
1 construction, property acquisition and permanent
2 mortgage financing. In addition, two new products are
3 being developed to provide existing owners equitable
4 rehab loans as well as second mortgage.
5 Again, we thank NationsBank.
6 In nine years NationsBank investment in
7 Highland Park has impacted property values increased by
8 65 to 85 percent and 448 homes have been sold to new
9 buyers and/or rehab work done on them.
10 NationsBank makes direct leveraging
11 contribution to support people, growth and development
12 specifically to support volunteerism and youth
13 development.
14 Our children are operating in neighborhood
15 school greenhouse to redesign the urban landscape for
16 public safety.
17 NationsBank has also supported directly
18 the development of programs to deal with increase crime
19 that we have in the community.
20 Because of NationsBank investment over the
21 last couple years, we have been successful in bringing
22 an additional $1.5 million in the United States Americor
23 National Volunteer Service to our community to deal with
24 crime issues.
25 Because of NationsBank leadership, we are
26 now receiving large contributions from other public and
229
1 private sources, corporations and foundations. We
2 assess NationsBank contribution directly to our
3 community at a rate of 3.5 to 5 million annually.
4 To maintain the community development
5 orientation, five characteristics of NationsBank is
6 encouraged to be continued as part of this merger.
7 Number one, we ask that we keep local branches in
8 Highland Park community types. Your bank serves as
9 anchors to the neighborhood development successes.
10 Number two, we ask that you maintain the
11 sensitivity to hiring staff at all levels reflective of
12 the cultural diversity of the neighborhood population
13 served.
14 Number three, we ask that you continue to
15 be simple. Don't get big, keeping -- don't let your big
16 keep you from being small. We love people that have
17 smiling faces that are set across the table from us to
18 help work out things to make things happen in our
19 community.
20 And, number four, we ask that you maintain
21 your neighborhood target development strategy.
22 And, finally, number five, we ask that you
23 regulate bank relocation, that it does not influence or
24 contribute to urban sprawl which is the leading cause
25 for urban decline.
26 I thank you for this opportunity to speak
230
1 and we strongly support the application for the merger.
2 BISHOP BATTLE: I am Bishop George Battle.
3 One of 12 Bishops of Episcopal Zion Church consisting of
4 3.5 million members worldwide.
5 I wrote a speech, but I am going to give
6 you this and speak from my heart.
7 MS. SMITH: Thank you very much.
8 BISHOP BATTLE: Number one, I've known
9 NationsBank, NC&B Bank, before they became NationsBank,
10 for 25 years. I am privileged to say this bank has
11 always been involved in the community.
12 I can recall going to Mr. McColl's office
13 as a young pastor store living in a parsonage where the
14 members felt, you know, the minister should have a good
15 house. I went in there with no money, no credit, met
16 with Mr. Mc Call and said, "I want a house." Interest
17 rate was 21 and a quarter percent. I am pleased to tell
18 you, I not only got the house at nine and a quarter
19 percent, but since that time I moved into even a bigger
20 house.
21 NationsBank, that's not necessarily
22 because of me, I know of a young man in St. Louis, just
23 several months ago who had a terrible financial problem.
24 He needed help. He called me, I called NationsBank, he
25 received in three days $6,000.
26 If you ever come to Charlotte and you hear
231
1 talk of a Gethsemane Enrichment Program, a program that
2 works with the Lord's underprivileged, a social
3 development program in the community.
4 Some 500 kids in 1974 received a national
5 award from President Bush as one of the best programs of
6 its kind in the nation. You will find that NationsBank
7 have supported that program with hundreds of thousands
8 of dollars before any other corporate contributor put
9 one dime in.
10 I can recall one session with Mr. McColl
11 brought the community in, these were the most low
12 economic development persons in the community. We told
13 him that we needed housing and three of the communities
14 where we work were the poorest kids in the neighborhood.
15 Those communities have been completely
16 redeveloped by NationsBank. Oh, by the way, I'm a
17 member of First Union Bank, so you ought to know that.
18 So I have no invested interest other than telling the
19 truth.
20 If all of the banks incorporated in
21 America was successful to the culture and to the people
22 that work in high management position at NationsBank,
23 your job would be a lot easier. I am pleased the tell
24 you that just several months ago my school --
25 (interruption.)
26 I hope you all aren't going to hold that
232
1 against me. Thank you, I have to start all over again.
2 Remove that.
3 In 1994 Livingston College, a small
4 historical black college 30 miles north of Charlotte,
5 was facing very, very financial difficulties. No other
6 institution would make a loan. I went to Mr. McColl, we
7 received $7 million that not only put us in terms of
8 ahead of where we were but now we are probably the only
9 small black college in America that have internet
10 capability for every student. That's a plug for
11 Livingston College.
12 In addition to that, they also made a
13 grant in helping that school in excess of -- over the
14 period of five years in excess of $350,000.
15 I can also attest to the fact that we have
16 a small junior college in South Carolina that was
17 struggling with accreditation. NationsBank came to the
18 plate and loaned the school $500,000 at the low interest
19 market rate. In addition to that, through in a hundred
20 thousand dollars to hire the consultants to make sure
21 that the school would be a credit for a minority student
22 that could not go anywhere in America because of
23 economic standards.
24 In addition to that, we could talk about
25 how they helped to completely transform Charlotte,
26 that's where I have been, and how if you ever travel
233
1 down Highway 49, that's southwest of Charlotte, you will
2 see an AME Zion church that was built there on Highway
3 49 that received all kinds of architect's award. Thanks
4 to NationsBank.
5 NationsBank, along with Mr. McColl and all
6 of the persons that work for him, you can call them on a
7 moment's notice and say, "We need a meeting. We have to
8 talk about some issues we have in our community."
9 They're always at the forefront.
10 Right here in California, right here in
11 California, one of our largest churches was set on fire.
12 NationsBank, without knowing the church, without having
13 any kind of investments, gave the church a substantial
14 contribution to help it get on its feet.
15 Birds of a feather flock together,
16 NationsBank -- when I see this sign, "NationsBank go
17 home." This can be home for NationsBank and it would
18 make this community a much, much better place, because
19 anywhere NationsBank has been they have been fair, they
20 have given minorities chances, opportunities to excel
21 and exceed.
22 And I'm here today at my own expense, I
23 couldn't even catch Mr. McColl to catch a ride, I had to
24 fly my own plane, to say that I think it would be a
25 disaster not to cause these two great things to come
26 together to provide the services for entire nation.
234
1 What a historical step we're taking today. I believe
2 with the smartness of this panel, I believe NationsBank
3 is going to prevail with the Bank of America and this
4 community is going to be better. Thank
5 you.
6 MS. SMITH: Any questions.
7 BISHOP BATTLE: Yes, I have my speech
8 submitted already. If you need me, just give me a
9 moment's notice and I'll be back.
10 MS. SMITH: Thank you very much.
11 We have no questions, so we thank you and
12 we'll go on to the next panel.
13 (Pause in proceedings.)
14 MS. LeBLANC: My name is Brenda LeBlanc.
15 I am here representing Citizens for Community
16 Improvement of DeMoines, specifically their Reinvestment
17 Task Force which was initiated in 1977 to work on the
18 problem of getting home loans in areas that had been
19 redlined.
20 After 20 years we have developed working
21 agreements for special CRA programs with ten financial
22 institutions. We work with each bank to help them
23 improve their lending record, and we also provide
24 services, such as a Home Buyers Club, which helps
25 prepare people not ready to buy. We also produce Credit
26 & Home Buying seminars that provide a day-long session
235
1 of information about the process of home buying and
2 introduce the various bank programs. More than 300
3 people attended our last seminar.
4 But we've had some problems in the last
5 several years with bank mergers. Hawkeye Bank, a
6 State-wide holding company was bought out by Mercantile.
7 Hawkeye had a branch in a low-mod neighborhood. But,
8 when Mercantile took over, they attempted to close
9 it. We fought this move and succeeded in keeping the
10 branch open.
11 But, while we had a good relationship with
12 Hawkeye, we find we do not now have the same kind of
13 relationship with Mercantile.
14 First Interstate Bank was another we had
15 an agreement with since 1978. They were out after a few
16 years by Boatmen's Bank. A new president came to
17 DeMoines from St. Louis and he told our task force that
18 we didn't need an agreement with them, because Boatmen's
19 had a great record of CRA lending, they had done great
20 things in
21 St. Louis, he told us, therefore, they knew all about
22 what was needed to be done.
23 We pointed out that DeMoines is not St.
24 Louis and what works there may not necessarily work
25 here. We pointed out we had developed expertise in our
26 situation and our needs, therefore, they needed to work
236
1 with us for a CRA program in DeMoines to be successful.
2 They eventually agreed and after that we had a signed
3 agreement with Boatmen's
4 Then a year ago Boatmen's was bought out
5 by NationsBank. We started out through the whole
6 familiar process again. Since last December we have
7 been debating back and forth about an agreement with no
8 success.
9 In dealing with the local banks after they
10 are bought out we are for the most part dealing with the
11 same people locally we have dealt with all along. The
12 problem is they are now getting directives from people
13 above, from people far aware we can not talk to and
14 people who seem not to care about whether CRA programs
15 work or not in our neighborhoods.
16 When we learned at our national NPA
17 conference that other cities were having the same kinds
18 of problems with mergers, we agreed that the time had
19 come to develop a national agreement that would give
20 official sanctions to our locally developed programs.
21 It was with high hopes that I attended the
22 meeting in St. Louis with NPA and executives from
23 Nations and Bank of America. If we could get an
24 agreement at the national level, we could move forward
25 at the local level then with assurance that we have
26 support from the top. And this would set a precedent.
237
1 With one such national agreement, we could move on to
2 others and all of us in our local communities could then
3 keep working with local branches to get loans moving
4 into our neighborhoods.
5 It was a big and important step for us,
6 but it was disastrous. That conversation reminded me of
7 the very first conversation we had with local banks who
8 back then had no idea what we were talking about,
9 confused reinvestment with charity and thought that
10 people in our neighborhoods couldn't afford to buy homes
11 and were all poor risks.
12 This morning I had this charitable thing
13 brought up again. The Mayor of Houston talked about
14 their volunteerism and philanthropy. That's commendable
15 and very good, but it's not reinvestment. We're talking
16 about -- we not talking about giving money to folks in
17 neighborhood, they're talking doing business with them.
18 We're talking about bringing us into the capitalist
19 system so that we also can do what people in the suburbs
20 can do, buy homes and start businesses.
21 Our local bankers now understand that with
22 smaller loans and relaxed guidelines our residents can
23 buy homes they can afford. These loans are improving
24 our neighborhoods and it's providing banks with a whole
25 new source of business, good business, but they cannot
26 do it without working with local people.
238
1 The main problem is one of marketing,
2 letting people know their options, and this is something
3 we constantly work on.
4 We were treated at that meeting in St.
5 Louis with contempt. Our decades of effort in our
6 communities were dismissed as, quote, petty politics,
7 unquote. And this from a person who is a chief CRA
8 officer for Nations.
9 When the person who is in charge of CRA
10 for a whole national bank's operation displays such
11 appalling ignorance, how can we expect CRA to survive as
12 mergers progress?
13 After we had the meeting in St. Louis, we
14 held a meeting in DeMoines with our local NationsBank
15 president and our chief CRA officer. The CRA officer is
16 the same person we have been dealing with for ten years
17 through three different ownerships of the bank. We know
18 the local personnel support our working agreement, and,
19 when we challenged them the problem is with upper
20 management, they did not deny it. The explanation was
21 the same it was in
22 St. Louis a lame, "We just don't do agreements."
23 Mr. McColl this morning said, and I quote,
24 I wrote this down verbatim, he said, "We will keep
25 decisions in the hands of local bankers who know how to
26 serve their communities. But in DeMoines, since
239
1 December, they have been trying to kill our local
2 agreement and the relationship that we've had for a
3 decade.
4 They have a cookie cutter program that's
5 national that they're trying to foist off on us. The
6 reason we can't accept it, the program is fine except
7 for one aspect, this program is targeted to low-income
8 people and not to low-income neighborhoods. Ironically
9 it was the same bank that ten years said to us, "We'd
10 like to do it differently."
11 We had other banks targeting to our
12 neighborhoods because redlining was the problem and
13 still is the problem. They said, "We'd like to target
14 instead to people below 80 percent of median income. We
15 said, "Okay. Chances are most of those people live in
16 our neighborhoods, so it would still have the same
17 effect."
18 But, after two years, we looked at the
19 figures. Not the same effect at all. They were making
20 lots of loans to people below 80 percent of median
21 income, but none of them were going in our neighborhood.
22 We said this isn't working, and they said, no, it isn't.
23 They went to targeting.
24 So now, eight years later, we've got
25 NationsBank telling us this is our program and you have
26 to accept this and ignoring our local people that have a
240
1 different history. Maybe it works other places, it
2 doesn't work in DeMoines.
3 We had no choice but to protest the
4 merger. It is our request that you disallow any bank
5 merges without a national agreement that will assure
6 that local banks be allowed to develop working
7 relationships with the local organizations. If this
8 cannot be done, then CRA will surely die. It is
9 survived only through the determination of people like
10 us in cities all over the country. If these big mergers
11 keep going on, it will eventually be beyond our ability
12 to deal with our local problems.
13 You, as regulators, can keep this from
14 happening if you will require that bank mergers only be
15 allowed with national CRA agreements that will allow and
16 honor local agreements.
17 MS. REICHER: What she said.
18 My name is Leslie Reicher, and I am the
19 second representative of the Pittsburgh Community
20 Reinvestment Group. As I traveled here to San
21 Francisco, I was wondering whether it was worth it given
22 that these institutions have really a very minuscule
23 presence in our city.
24 Because it was clearly quite an expense
25 for us to come here both for PCRG, the organization I'm
26 representing, and my own community organization that I
241
1 work for.
2 But, based on our research, at PCRG and
3 the very limited experience we've had with Nations and
4 Bank of America and what I've heard here today, I'm glad
5 I'm here, mostly to voice our opposition.
6 I was trying to place myself in your
7 position, because my head is kind of swimming, I'm
8 hearing all these stories about what Nations isn't doing
9 and I'm hearing stories about some of the wonderful
10 things they are doing.
11 But, as Brenda said, that's charity,
12 that's relationship building and it's not lending. I
13 think what we're here to talk about today is lending.
14 We're talking about the regular course of doing
15 business. And I think we need more assurances than some
16 individual relationship to have that assurance going
17 forward in this age of mega mergers and acquisitions.
18 So I'm really concerned about it.
19 I know today the impact on such an
20 acquisition in a San Francisco, in cities, in Illinois,
21 in Iowa and all the places we've heard of today, I have
22 no doubt that tomorrow it's going to be Pittsburgh.
23 We've already experienced an acquisition with National
24 Citibank buying one of our local Pittsburgh banks. We
25 were very worried about it because the -- we were not
26 going to have the home office, the corporate office
242
1 being in Pittsburgh.
2 And they resisted an agreement and flew us
3 up to Cleveland to talk us out of insisting on the
4 agreement, but eventually understood, because we're
5 going to be gone tomorrow, those bankers are going to be
6 gone tomorrow and we'll have nothing left.
7 We cannot go just on good will. They say,
8 "Trust us," and we say, "We don't know you, we can't
9 trust you." Who we trust are the people we have been
10 working with and they may not be here tomorrow, so we
11 need some way institutionalizing this.
12 I have prepared remarks and I will give
13 them to you. I mean, this booklet here is our protest
14 and it's probably bigger than the number of applications
15 received in Pittsburgh from either Nations or
16 BankAmerica.
17 We have mortgage corporation subsidiaries
18 in Pittsburgh for both banks. They do very little
19 lending, hardly any lending, like two loans to African
20 Americans, two loans in the whole city of Pittsburgh in
21 1996, none in 1997 for NationsBank.
22 BankAmerica had a little bit more
23 activity. I'm not going to bore you with that. It's in
24 here, our letters of protest are in here from 13
25 organizations in addition to Pittsburgh Community
26 Reinvestment Group, which is a 29-member coalition in
243
1 the city.
2 So I would just would like to say that I
3 really hope that you will postpone your decision until
4 some specific agreements with the local -- with local
5 cities can be worked out.
6 I hope that you, as a regulator, can
7 develop a system that kind of matches this age of
8 national mergers. We need a better system to have
9 these hearings be more accessible to people.
10 It's really -- I mean, I can't get over
11 how many people actually were able to come.
12 So, thank you for having it and I hope
13 you have more and I hope you have them in more
14 places.
15 MS. SMITH: Thank you.
16 MR. GOODWIN: My name is Gordon Goodwin.
17 I am with Rural Development and Finance Corporation.
18 I'll read a short, prepared statement.
19 Rural Development and Finance Corporation
20 is a development finance intermediary headquartered in
21 San Antonio, Texas. We provide technical assistance and
22 loans to entrepreneurs and community development
23 corporations that are building enterprises, affordable
24 housing and community facilities in our countries most
25 severely poverty impacted areas.
26 To date we have invested over $12 million
244
1 in 21 states, created or retained 2500 jobs and financed
2 the construction of over 500 units of affordable
3 housing. With more people working primarily along the
4 Texas/Mexico border. In the past we've worked in
5 California as well as in North Carolina, Florida, New
6 Mexico.
7 Like other financial intermediaries, we
8 rely on partnerships with financial institutions such as
9 banks, corporations, religious orders and foundations to
10 make the low market rate investments in our loan fund so
11 that we can obtain flexible, affordable capital that we
12 can re-lend.
13 Because a large part of our work is
14 providing problem-solving assistance to rural
15 entrepreneurs and housers, we turn to these same sources
16 to underwrite some portion of our cost to provide that
17 help.
18 Bank of America has been an important
19 partner with us in doing our work and the work in the
20 development field at large in general, and has been
21 important as a grantor and as an investor. It's the
22 only large-scale bank that has institutionalized its
23 community development lending mission by capitalizing a
24 separate institution, the Bank of America Community
25 Development Bank.
26 Over the last five years, the development
245
1 bank has financed some $2 billion of multi-family
2 housing and small business development in low income
3 communities. It has also made well over $500 million in
4 equity investments.
5 In 1997, Bank of America committed to
6 invest $500 million over the next two-and-a-half
7 years to rural communities. This investment
8 commitment is backed with a pledge to make $5 million in
9 grants to support innovative and meaningful
10 partnerships. This is the most significant commitment
11 ever made to the credit needed of rural areas by a
12 banking institution.
13 This level of commitment is critical to
14 our work, and we urge both Bank of America and
15 NationsBank to uphold and even to expand this commitment
16 to match the breadth and scope of the new market area
17 the merger may encompass.
18 Thank you.
19 MS. SMITH: Thank you. Questions?
20 MS. REICHER: Ah, come on.
21 MS. SMITH: Thank you very much.
22 MR. FRIERSON: I would like to thank you
23 all for the panelists, to thank you for coming the
24 distances. Your information has been very helpful
25 and useful, and we will consider it carefully.
26 We will also consider it carefully.
246
1 Thank you very much.
2 (Pause in proceedings.)
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
247
1 MS. SMITH: All right. Why don't we start with
2 Mr. Shapiro.
3 MR. SHAPIRO: I don't think it's often that a
4 small public agency such as ours can custom design our own
5 community lending program. That's exactly what we did
6 with NationsBank's help. I'm Harold Shapiro, the
7 Executive Director of Catawba Regional Planning Council
8 and it's affiliate Development Corporation. We are the
9 Council of Governments for four counties and 21 towns and
10 cities of the north central section of South Carolina.
11 One of our counties is within the Charlotte
12 metropolitan area, the remaining three are rural and
13 relatively poor. To put our area in perspective, the
14 approximate population of our largest county is about
15 145,000 and our largest city is 50,000.
16 As the Council of Governments, we provide a wide
17 range of services and key among these is community and
18 economic development in the form of project planning,
19 grants management and lending. Our lending is conducted
20 primarily through our public nonprofit development
21 corporation. We use resources such as the SBA 504 program
22 and the EDA's revolving loan fund. Since 1982, our
23 development corporation has made over 90 loans totaling
24 $60 million, our borrowers have created in excess of a
25 thousand jobs.
26 My purpose today is to tell you about
248
1 NationsBank's support of our lending activities.
2 NationsBank involvement is varied. NationsBank is
3 represented on the Development Corporation's board of
4 directors by Mr. Randy Imler, his bankers' experience and
5 creative approach to community lending have been
6 invaluable.
7 In related activities, NationsBank has helped
8 promote our lending services by providing funding for
9 promotional materials. It has helped sponsor the first of
10 a planned series of business seminars such as the one
11 recently held to promote child care facilities in
12 low-income areas.
13 NationsBank has also enabled us to start a
14 community lending program which I first mentioned. This
15 program offers micro loans to low-income residents for
16 small business development and for homeowner repairs.
17 Our community lending program began one year ago
18 with a $400,000 three percent interest loan from
19 NationsBank. In a truly collaborative effort, its bankers
20 and our staff developed a region-wide lending strategy to
21 serve the needs of low-income residents. These loans
22 funds are available for use throughout our region
23 regardless of whether NationsBank has a presence or not.
24 While other banks may eventually participate in
25 this community lending program, NationsBank was the first
26 to commit. Of the other banks expressing interest, not
249
1 one has come close to matching NationsBank's funding.
2 Our community lending program is successful,
3 loans ranging from $1,000 to $50,000 are made. To date,
4 over one-third has been lent to help low-income residents
5 establish businesses and make essential home repairs.
6 Although these loans are open to all applicants meeting
7 low-income guidelines, all of our business loans to date
8 have gone to minority or women owners.
9 Is NationsBank's effort unique to our own area?
10 We believe community participation is part of the bank's
11 general corporate culture. Locally, bankers from
12 NationsBank are prominently involved in numerous community
13 and cultural causes. Also, in checking with some of our
14 counterparts within South Carolina, we have found that
15 NationsBank is active in community economic development
16 lending in other areas of the state.
17 Our experience in working with NationsBank may
18 have some wider implications. Although our agency is an
19 independent entity with its own board and staff, we also
20 are part of a nationwide network of similar organizations.
21 Many of these have experience in operating revolving loan
22 funds and the like. These organizations generally have a
23 practical understanding of local economic and community
24 development needs. Rural areas of our country, in
25 particular, rely heavily on such agencies to provide
26 needed assistance, including community and public sector
250
1 lending.
2 I believe this network represented through
3 organizations such as the National Association of
4 Development Organizations would welcome the opportunity to
5 assist national banking institutions in partnering with
6 their community lending program.
7 In closing, I want to emphasize that our strong
8 testament of support for NationsBank comes from the
9 history of our working relationship. We hope our example
10 provides insight into NationsBank's community lending
11 activity. Thank you for this opportunity.
12 MS. SMITH: Thank you. Mr. Reid.
13 MR. REID: Thank you, Madam Chairman. My name is
14 Donnell Reid, I'm the President of Gateway National Bank
15 in St. Louis, Missouri, one of 33 African American banks
16 throughout the United States. Our bank is based in
17 St. Louis, the gateway to the west and the home of Mark
18 McGuire, the man that was destined to eclipse Babe Ruth's
19 record in 1998.
20 But I come today to lend my voice to those in
21 support of the merger of NationsBank and Bank of America.
22 Our company has been intimately involved with NationsBank
23 and several predecessor banks. The state of Missouri ten
24 years ago had over some 700 different banks. And we have
25 witnessed throughout the state extensive mergers and
26 acquisitions, so we are fully aware of what happens and
251
1 the anxiety that comes with that.
2 I can tell you, however, that our experience with
3 NationsBank, its acquired Boatmen's National Bank and its
4 acquired Sovran National Bank and its acquired First
5 National Bank of St. Louis has been extraordinary.
6 When our bank was formed 33 years ago, it was
7 First National Bank that provided the management
8 assistance and the financial assistance that we needed to
9 get started. It was First National Bank that provided
10 managers to assist us in running our bank.
11 When they were acquired by Boatmen's Bank, it was
12 Boatmen's Bank that provided additional capital and
13 continued the support provided by First National Bank some
14 20 years ago. When NationsBank acquired Boatmen's Bank,
15 we were concerned as to whether or not this relationship
16 would continue. We were pleasantly surprised that not
17 only has it continued but more has been done.
18 NationsBank has played a very instrumental role
19 in many aspects of economic activity in St. Louis. Not
20 only has it provided additional capital to our bank, it
21 has provided financial and managerial support to our bank.
22 But NationsBank has become an intimate part of the fabric
23 of our entire community. If you look at what's happening
24 with our school systems, NationsBank is involved. If you
25 look at what is happening to development and redevelopment
26 throughout the community, NationsBank is involved. If you
252
1 look at what is happening to the resurgence of our
2 downtown which is vital to our community, NationsBank is
3 involved. If you look at what is happening to the
4 suburban communities, the small towns, all of the
5 different areas of St. Louis, which is a two and a half
6 million dollar community, NationsBank is intimately
7 involved.
8 For those who have some concerns about the
9 merger, I can assure you that if NationsBank comes aboard
10 you will find many, many more benefits than you can
11 possibly imagine. Let me just cite a few of the benefits
12 that NationsBank and its predecessor has provided our
13 small $27 million bank.
14 When we were formed three decades ago, they were
15 there providing all sorts of assistance. When we needed
16 additional capital required by the regulators, it was
17 NationsBank that pulled together local companies to make
18 sure we had the capital we needed. Any time there was
19 assistance needed, whether operationally or managerially,
20 NationsBank is always there for us. Whenever we need
21 assistance on our investments, it's NationsBank we turn
22 to. Whenever we need to make decisions on capital
23 expenditures, it's NationsBank that advises us. We are
24 currently exploring the possibility of forming a CDFI in
25 St. Louis and it is NationsBank that is leading the way.
26 NationsBank was also very, very instrumental two
253
1 years ago when we, like so many other African American
2 banks, needed to broaden our loan involvement.
3 NationsBank came forward and sold us loans at a very
4 attractive rate to enable us to double our outstanding
5 loans, and it began a program with us, as well as other
6 minority banks across the country, in providing loans.
7 This company has been vital to our success every
8 step of the way. And I can assure those of you who may
9 have some concerns, that with NationsBank involved in your
10 community, you will find benefits more than disadvantages.
11 Thank you very much.
12 MS. SMITH: Thank you. Mr. King.
13 MR. KING: Good afternoon. My names is Charles
14 King from Little Rock, Arkansas. Donnell, while we don't
15 have a Mark McGuire or even have a major league team in
16 Arkansas, we do have a guy by the name of Bill Clinton
17 that we're real proud of, too, so I'll get in my local
18 plug.
19 Good afternoon. I do bring you greetings this
20 afternoon from Arkansas. My name is Charles King and I'm
21 the Executive Director of the Arkansas Regional Minority
22 Supplier Development Council, Incorporated. The Minority
23 Supplier Development Council is the oldest and largest
24 minority business advocacy group in Arkansas and I'm here
25 today on behalf of those minority businesses and the
26 minority community across the great state of Arkansas to
254
1 unequivocally give our support and endorsement of
2 NationsBank's merger efforts.
3 Arkansas is a very small state with many needs in
4 the arena of minority economic development. While we
5 share with the rest of the country, our number one need
6 being access to capital, our needs are much deeper.
7 In Arkansas, prior to the arrival of NationsBank
8 in the fourth quarter of 1997, minority businesses had
9 little opportunity to do business with the financial and
10 banking entities. In fact, the procurement of goods and
11 services by banks from minority businesses was limited to
12 janitorial services in the bank lobby only. No
13 contractors served as primes to build or to add on to
14 existing structures, no technology firms provided
15 technical support or technical service or equipment to
16 banks.
17 NationsBank has changed the outlook of minority
18 businesses and the minority community in Arkansas. After
19 years of little to no respect, minority businesses are
20 finally achieving access to opportunities for capital and
21 access to opportunities to do business with the bank.
22 In the first nine months of its presence in
23 Arkansas, NationsBank has achieved a 39 percent
24 participation rate with minorities in purchasing goods and
25 services. Minority businesses are no longer just cleaning
26 lobbies. We actually have with us today someone who
255
1 traveled with me who has a contract with NationsBank to do
2 vault and safe deposit boxes, places we never thought we
3 would get into. Minority architects are serving as primes
4 to retrofit buildings across the state. Minority
5 contractors are primes on mid to large bank construction
6 projects. Technology firms, technology firms are entering
7 the doors and the list goes on and on.
8 NationsBank within one year has become the
9 example for other banks in Arkansas to emulate. The bank,
10 in fact, received the Minority Business Community's Impact
11 Award for its efforts in 1997 and '98. NationsBank is
12 moving forward with educational programs and access to
13 capital through innovative approaches using community
14 support groups such as ours.
15 Earlier this year, when the Arkansas state
16 branches of the NAACP hosted its regional conference,
17 NationsBank stepped forward, as no financial institution
18 has in the past, to support the conference financially and
19 in kind. Through NationsBank's support, the conference
20 was one of our most successful events since the Little
21 Rock Central High School crisis in 1957.
22 And finally, one critical area that NationsBank
23 participates in in Arkansas is communications. Cost and
24 communications in the community generating ideas because
25 we in Arkansas believe that ideas generate hope and hope
26 generates opportunity and opportunity generates economic
256
1 development, economic development generates a healthy
2 community, communities based on good commerce. Was it not
3 the great philosopher Socrates that asked what is the
4 purpose of commerce if not to build communities? The
5 minority community and the business community at whole
6 believe that the relationship, actions and activities that
7 we share with NationsBank is building our community.
8 Also, that any growth or expansion that the bank
9 acquires will become a new opportunity for growth in our
10 strong relationship with NationsBank. Individuals like
11 Dorothy Brothers at their corporate office, Diane Quail at
12 their regional office, Virgil Miller and Sam Hidden
13 (phonetic) at their local office, as well as the President
14 of NationsBank Arkansas Brian Foster make it possible with
15 my and other organizations to have such a relationship.
16 I thank you for this opportunity to come and just
17 talk about a very good friend to our community,
18 NationsBank. Thank you.
19 MS. SMITH: Thank you. Mr. Jenkins.
20 MR. JENKINS: Thank you, Madam Chair, and thanks
21 for the opportunity to address the Reserve Board this
22 morning on such a very important topic. My name, of
23 course, is Carlton Jenkins and I am here today in my
24 capacity as president and CEO of Founders National Bank of
25 Los Angeles.
26 Our institution is one of only three African
257
1 American owned institutions in Los Angeles and one of only
2 three headquarted in South Central Los Angeles. Since our
3 opening in 1991, our institution has grown to become over
4 a hundred million dollars in assets serving 17,000 account
5 holders in a five branch system. I'm here today at the
6 invitation and in support of our newest institutional ally
7 NationsBank and also secondarily in support of our
8 historical ally and strategic partner Bank of America. We
9 are blessed to count Bank of America as a historical ally
10 and NationsBank as a potentially new ally.
11 It is important, however, as we are a minority
12 bank, to also note, however, that I am here also as a
13 member of the Western Independent Bankers Association, the
14 California Bankers Association, the IBAA and the ABA. I
15 cite that because, notwithstanding my positive feelings
16 about this particular transaction, I don't want my
17 testimony to appear to be de minimus relative to our
18 institutional concerns about the kind of this advantageous
19 impact that mergers of this can have on small community
20 banks such as ours.
21 Having said that, however, it is important enough
22 for us to come today to set the record straight relative
23 to some of the positive experiences that we have had in
24 our historical dealings with Bank of America as well as
25 our most recent dealings with NationsBank, and I might add
26 pre-merger announcement. I feel this historical
258
1 perspective is important because I believe it to be
2 demonstrative of the kind of positive impact that a major
3 bank CRA commitment when focused on minority banks can
4 have and their ability to serve inner city communities.
5 Additionally, I believe the commentary herein on
6 our prospective relationship relative to NationsBank
7 evidences the kind of relationship that can and will
8 undoubtedly occur as a result of the newest CRA commitment
9 made by the Bank of America/NationsBank organization.
10 Bank of America has been an extremely significant
11 participant in the growth and maturation of our
12 institution since our opening in 1991. This in spite of
13 the fact that in several of our branch locations we are
14 clearly a competitive institution to them for both
15 deposits and loans.
16 In spite of that, though, Bank of America through
17 our long-term relationship with their EVP Don Mullane and
18 as a direct consequence of their CRA commitment here in
19 Los Angeles, they have assisted our institution Founders
20 National Bank since 1991 in the following ways: They have
21 provided us $1.8 million to the bank's shareholders to
22 refinance initial debt incurred in starting the
23 institution. They provided $300,000 in new Tier 1 equity
24 capital through their purchase of preferred stock in
25 Founders Capital. I might add that it's still resident in
26 our institution. They've also provided $700,000 in Tier 2
259
1 equity capital through the issuance of subordinated debt.
2 Tier 2 capital, I might add again, it is still resident in
3 our institution and is counted very important as part of
4 our capital base.
5 They provided assistance to us in the acquisition
6 of two branch banking offices that had planned to close as
7 a result of the merger years ago with SecPac. One of
8 those offices is now our largest and our most significant
9 office. They provided over the years assistance in the
10 analysis of our asset/liability policies, investment
11 practices, et cetera, et cetera. All of the things that
12 have been designed to enhance the viability of our
13 institution.
14 NationsBank recently through the efforts of
15 Senior Vice President Darryl Basham and again before the
16 merger was announced, I might add, has over the last
17 several months become seriously involved in our
18 institution and has agreed in principle to look at
19 seriously providing us with approximately $10 million in
20 NationsBank consumer loans. They've agreed to provide
21 infrastructural support in areas such as training,
22 marketing, computer automation systems and process
23 analysis, loan participation relationships, private
24 banking services, cash management services, credit card
25 services, ATM services, et cetera, et cetera.
26 The point I try to make is that these
260
1 institutions, when focused, can be and have demonstrated
2 their capacity to be sensitive and understanding of the
3 need to ensure competitiveness in communities that they
4 serve by enhancing and providing the support necessary to
5 indigenous institutions such as ours who exist to,
6 frankly, become and provide a more intimate level of
7 service, even against themselves. And Bank of America
8 historically, even in the face of branch competition side
9 by side has never waivered from their support of our
10 institution. And I can only hope and I can only believe
11 that, by virtue of the new relationship we've established
12 with NationsBank, that this kind of practice has been
13 internalized and will ultimately prevail as the way of
14 doing business in this new combined institution.
15 Accordingly, we have nothing but support for this
16 kind of merger. Again, recognizing the impact it can have
17 on our industry. We believe, however, they've been able
18 to see the forest from the trees relative to ensuring that
19 institutions like ours continue to exist.
20 MS. SMITH: Thank you. Ms. Dodd.
21 MS. DODD: Thank you for allowing me to address
22 the board today. My name is Cathie Dodd, I am a Woodbine
23 community organization.
24 MS. SMITH: Can you move the mike a little
25 closer?
26 MS. DODD: Is this better? We're a 501C3
261
1 nonprofit out of Nashville, Tennesse. And I guess we have
2 the Oilers. We don't have any home-run hitters but we
3 have got the Oilers, I don't know what that means.
4 Our mission as a nonprofit is to serve the folks
5 in middle Tennesse and to improve their life-styles,
6 including their education and their housing and the whole
7 gambit of what we do. We are a small CDC in Davidson
8 County and we've been around since 1985. We are
9 definitely a grassroots organization.
10 And NationsBank came to us probably around eight
11 years ago to help us with something that we were kind of
12 struggling with and that was capacity. And once we have
13 been able to do that, we have not --we're not the small
14 kid on the block anymore.
15 Tennesse was one of the first states in the
16 United States to start welfare reform. We did this two
17 years before it became mandated by the federal government.
18 One of the things that in our program that these folks
19 have to do in our Families First Program, which is what
20 our welfare reform program is called, is they either have
21 to work 40 hours a week or they have to go to school 40
22 hours a week or they have to do a combination of both, and
23 they are only on this program for 18 months.
24 It became real obvious that we can't sit around
25 and talk about it very long because the 18 months time
26 period is not a very long time and it was something the
262
1 state had committed to. And Nations came and said, "What
2 can we do to start working on this?" Before the program
3 was instituted, we started a welfare-to-work program
4 within our community, we brought people in to get them job
5 ready. NationsBank came in with computers that were
6 outdated within their bank to put up a computer lab, we
7 updated the computer lab. The most important thing that
8 they came in with with this program was volunteers. Their
9 staff, their employees, come to my center once a day and
10 teach this class.
11 We come to the table with computer teachers, we
12 facilitate getting the people to the table and, to date,
13 we've put 22 people out of the welfare roles. That may
14 not seem a lot to you, but for a program that just started
15 a year ago, we're really pretty proud of it.
16 One of the things that we have done in Woodbine
17 is we have a thing called Peer Lending and it's a model
18 from the Green Bank out of Bangledesh and it was real
19 scary in Nashville, Tennesse to talk about loaning people
20 who have no money money. As a matter of fact, the people
21 from SCORE came to me and said, "What do you use for
22 collateral?" And I said, "Well, nothing." And they said,
23 "Well, it doesn't work." And I said, "Well, okay." And
24 so somebody said, "No, really, it doesn't work." And I
25 said, "Well, it keeps working."
26 NationsBank came with a line of credit for these
263
1 folks to use. It was a pretty scary thing to do and it's
2 five years now down the road. We have had many, many
3 successful small businesses coming out of this program.
4 We have a new growing Hispanic community in Nashville that
5 NationsBank is going to provide the funding for their Peer
6 Lending group.
7 On the social side of things, what NationsBank
8 has done has been right there for my folks and my clients.
9 They were very instrumental in doing some big stuff in
10 Nashville which we were all part of and that was bringing
11 everybody together and starting the Housing Trust Fund.
12 The Housing Trust Fund now helps people have access to
13 downpayment and closing cost money. They brought 11
14 lending institutions together and their money and, to
15 date, have done over 300 loans to these folks. So they
16 took the lead. They didn't have to carry the banner, they
17 just took the lead and made it happen.
18 One of the things that I would really like to
19 talk about is -- again, I'm from Nashville, Tennesse and
20 with music, Music Row is what we do. There's a section
21 next to Music Row that contains probably the worst housing
22 and probably the most blighted area that is part of our
23 city. And HUD had let the properties decay and there was
24 quite not an answer for this.
25 The NationsBank CDC came in and purchased the
26 property and, of course, we had community reaction to it
264
1 and the community was screaming that this is going to
2 happen and that's going to happen. And what has actually
3 happened is in next month they are going to open and rent
4 up their first units of these and there's going to be 394
5 units. There will be, hopefully, all of the drugs and the
6 things that were brought in by all this stuff, will be
7 gone. Hopefully, we'll follow and emulate the first CDC
8 project they did in Nashville that has a Make A Difference
9 Center. Woodbine is involved with our Make A Difference
10 Center in the fact that we hold Homebuyers' Clubs there.
11 Our nonprofit holds 20 Homebuyers' Clubs a month
12 and we have about 400 folks doing this and we get folks'
13 mortgage ratings and we're proud of doing that and all the
14 banks participate with us and life is great.
15 Well, I went to the Homebuyers' Club at the
16 NationsBank apartment CDC and was pleasantly surprised at
17 the tenants that they have put into their properties.
18 Their tenants are the kind of folks that you want to live
19 next door to, but let me share with you these are
20 low-income folks, these are folks who have been living in
21 substandard housing, they've made available the best case
22 scenario for them and these people that have rented in
23 their properties will be homeowners very, very soon.
24 Thank you for allowing me come here today and I do support
25 this measure.
26 MS. SMITH: Thank you. Mr. Wright, sorry I
265
1 missed you.
2 MR. WRIGHT: My name is Leroy Wright and I'm the
3 President and CEO of TLC Next Generation International
4 Holdings Company based in St. Louis, Missouri. I'm going
5 to, in interest of brevity, be very specific.
6 Basically, NationsBank, since it's entered into
7 the St. Louis market in 1997 with the acquisition of
8 Boatmen's Bank, has done some very good things for the
9 African American community in St. Louis and the community
10 at large. They've created community partnerships between
11 a major banking institution and the African American
12 community in St. Louis, renewed realistic support for
13 African American businesses through community investment,
14 provided loans and equity investments in the St. Louis
15 community which is causing a ripple effect in the St.
16 Louis region from an economic standpoint especially in our
17 downtown St. Louis area.
18 And African American employment within
19 NationsBank seems to be increasing since its inception in
20 1997 in the St. Louis market. Basically, we in St. Louis
21 have seen an overall improvement in the business
22 environment of the community for African Americans.
23 With regards to my company, TLC Next Generation,
24 it's a 15 store chain of cellular retail outfits.
25 NationsBank had a tremendous impact on working with me
26 diligently to complete my financing package for the
266
1 acquisition of this company.
2 When I bought Next Generation in 1997, it marked
3 the largest acquisition in the history of St. Louis by an
4 African American. The acquisition created the fifth
5 largest minority-owned company in the St. Louis area
6 employing over 80 people. One of the major impediments of
7 minority businesses involves around having sufficient
8 equity capital to obtain bank loans. I, as well as other
9 minority-owned companies, have been able to utilize and
10 capitalize on the fact that NationsBank, in addition to
11 the commercial side, has a small business investment
12 company that's also located in St. Louis. In addition to
13 that, they're the largest investor and the only other
14 small business investment company in St. Louis, Missouri
15 Civic Ventures Investment Fund.
16 In short, in closing, I would just like to say
17 that because of the NationsBank commitment to the
18 community, investment and relationships building in
19 St. Louis, Missouri and the communities that it serves
20 nationwide, I'm here to testify on behalf of the merger
21 between NationsBank and Bank of America. Thank you very
22 much.
23 MS. SMITH: Thank you. Any questions from the
24 panel? If not, thank you very much for coming and we will
25 move on to the next one.
26 I think we're ready to start, if you are. This
267
1 is a combination of -- a combination panel. And have they
2 been assigned an order?
3 UNIDENTIFIED SPEAKER: Yes. They all know.
4 MS. SMITH: Okay. We can start. If you'll say
5 your name. I can't see from here so if you can tell us
6 who you are.
7 MS. JOHNSON: Good afternoon, I'm Barbara Johnson
8 and I'm the cofounder and the Executive Director of the
9 Women's Initiative for Self-Employment here in
10 San Francisco.
11 We are a nonprofit 501C3 founded in 1988. We
12 provide micro-enterprise training, financing and support
13 services to low-income English and Spanish speaking women
14 who are residents of the Bay Area. Women come to Women's
15 Initiative because our training and financing is sensitive
16 to who they are, their needs, their lives, and because we
17 provide them training and support to grow and start
18 successful small businesses.
19 We serve an exclusively low-income female
20 clientele. 70 percent of our clients are women of color,
21 25 percent of our clients receive their training in
22 Spanish. We've provided self-employment training,
23 assistance, financing to more than 3500 women. More than
24 800 small business start-ups and expansions have begun
25 because of our assistance. We've made more than 150 loans
26 totaling more than a half a million dollars and leveraged
268
1 in excess of 850,000 of commercial lending. And we
2 maintain historic default rate of five percent in our loan
3 fund with poor women who don't know how to manage money;
4 right? Yep. And who shouldn't really be able to borrow
5 money to start a business, but they sure do.
6 And we've been able to achieve this competency
7 and develop our capacity in part because of the long-term
8 support of Bank of America. We've received generous and
9 consistent in kind general operating loan fund capital and
10 special event support from Bank of America since the
11 planning stages in 1987. The total of this support has
12 been in excess of $620,000. We definitely consider Bank
13 of America a partner with us.
14 Bank of America foundations early and continued
15 support have attracted other corporate and philanthropic
16 support which together have allowed Women's Initiative to
17 help women change their lives and the lives of their
18 families and the lives in their communities.
19 I'm concerned that this kind of support will
20 change with this merger. I want assurances that it won't.
21 I know that Bank of America has a concerned investment
22 with us and we want to make sure that this return on this
23 investment can continue. There is a need and, indeed, the
24 need is increasing.
25 My comments today are not directed against this
26 merger. I'm here to ask this panel to seriously consider
269
1 imposing some conditions before the merger is approved.
2 Women's Initiative feels strongly that this new merged
3 bank must promise an equal or larger commitment of
4 philanthropic support over the next ten years and more to
5 California nonprofit organizations which provide critical
6 community, economic, social development assistance to
7 low-income and disenfranchised communities. We're
8 requesting that the merged bank's foundation maintain
9 staffing, grant making discretion in California and in
10 San Francisco. Without this kind of assurance, BofA's
11 historic, informed, aware and what we consider sensitive
12 community investment and corporate citizenship policies we
13 feel are in danger of being eroded.
14 I maintain, it's impossible to have your finger
15 on the pulse of a state, let alone that of a specific
16 urban or rural community from the far reaches of the east
17 coast. California, its communities, its economies, its
18 challenges are nowhere else on earth like anywhere else on
19 earth, that's unique, it can't be known from afar. So
20 without an assurance of continuing presence and a
21 charitable funding commitment by the merged bank over the
22 next ten plus years which is equal or greater, we're
23 afraid of losing this very important support.
24 And finally, I feel that the people and the
25 corporate citizens of California will lose an important
26 corporate role model and leader within California national
270
1 banking industry and I don't think that the leader of a
2 pack should be made lame.
3 And so we really would like to have assurances
4 and some kind of stipulations made that the important
5 philanthropic work and history will be maintained.
6 There's all sorts of talk and commitment about
7 lending to housing to businesses and I understand that
8 because that's a bank's business. There has been nothing
9 that I know of about the continuation of corporate
10 philanthropic support and I'd like it considered, please.
11 MS. SMITH: Thank you. Next.
12 MS. JUNG-LEE: Good afternoon, I'm Lynette
13 Jung-Lee with the East Bay Asian Local Development
14 Corporation. I also want to express my concerns regarding
15 the merger of Bank of America with NationsBank.
16 EBALD, which is the acronym for our organization,
17 is a 23 year old community development corporation which
18 develops affordable housing and community facilities
19 including child-care centers, nonprofit offices and
20 storefronts for small businesses. We also do planning and
21 organizing work in targeted neighborhoods and we provide
22 assistance and micro-loans to small businesses. Our
23 target population is low-income residents of the East Bay
24 and with a special focus to the Asian and Pacific Islander
25 community.
26 We have worked with Bank of America for many
271
1 years. BofA has assisted EBALD by making construction
2 loans for multi-family housing projects and being a
3 permanent lender for our Asian Resource Center building
4 which houses many nonprofit organizations and small
5 businesses.
6 BofA has also assisted by providing grants for
7 programs such as a pilot Bay Area wide collaborative for
8 individual development accounts for low-income households
9 to build up individual assets. And we have many partners
10 in this process, including the Women's Initiative. BofA
11 has also supported programs which develope capacity for
12 community development practitioners and organizations,
13 such as the Leadership Academy with the Development
14 Training Institute.
15 A really important element for BofA's work in the
16 community is that many of their community development
17 staff live in or work in the neighborhoods in which the
18 revitalization efforts are taking place so that they have
19 an understanding of and experience with the community
20 needs and dynamics and the organizations who are involved
21 with that transformation process.
22 If the merger results and bank community
23 development staff being headquartered in North Carolina,
24 reviewing loans and grant proposals for projects and
25 programs in California, there will not be that same kind
26 of understanding. It is critical, therefore, that there
272
1 continue to be bank community development staff
2 headquartered here in California. It is also important
3 that the structure of the BofA Community Development Bank
4 be maintained, recognizing the greater flexibility and the
5 various strategies that such an entity can have and can
6 play in terms of revitalization efforts.
7 It is also important that NationsBank, who I
8 understand has a CDC, not compete with the nonprofit CDCs
9 and HDCs that are here in California, but that the banks
10 instead provide a nurturing and supportive role to the
11 CDCs and HDCs who are based here.
12 The BofA and NationsBank merger must make a clear
13 commitment to California. We believe that we must -- we
14 want to see some specific commitments around specific
15 programs and I ask that you record the continuance of the
16 Community Development Bank, the commitment to affordable
17 housing, the economic development and rural initiatives,
18 the continuance of the Bank of America foundation, and an
19 increase in the level of charitable contributions above
20 what BofA has already offered in past years. Thank you.
21 MS. SMITH: Thank you.
22 MR. ISHI: It is very nice to follow Lynette
23 Jung-Lee of the East Bay Asian local corporation. Our
24 organizations house her building and thank you for your
25 long-time support.
26 Good afternoon, my name is Tomoji Ishi, I'm a
273
1 sociologist with a Ph.D. from the University of California
2 Berkeley. And while I'm teaching sociology and Asian
3 American studies at the City of San Francisco, I also
4 serve as a senior researcher and a senior project manager
5 of the Japan Pacific Resource Network which is called
6 JPRN. JPRN is an Oakland based community organization
7 which has been in 13 years in the forefront of social
8 corporate responsibility advocacy for the last 13 years by
9 educating banks and corporations in both in America and
10 Japan. JPRN is currently conducting CRA research project
11 through which we examine the bank -- California based
12 banks small business lending practice as well as branch
13 activities.
14 Also, next Monday, July 13th, we are sponsoring
15 an Oakland based community economic (unintelligible) forum
16 with an Oakland based community organization and the City
17 of Oakland. This Oakland forum will focus on the impact
18 of the cities of major mergers by banks, including the
19 BofA and NationsBank and how it affect communities of
20 color and the poor.
21 I am very troubled by the proposed acquisition of
22 Bank of America by NationsBank. It is my belief that this
23 acquisition will have many adverse effects particularly on
24 the low-income and the minority communities. However,
25 today out of many adverse effects, I will focus on my
26 comments on the issue of the branch closures.
274
1 It has been recognized that the larger the banks
2 become, the more branch closures and consolidation take
3 place. This phenomena will be accelerated by bank
4 mergers. The Bank of America acquisition proposal
5 (unintelligible) our concerns. For example, from January,
6 1995, to June, 1997, Bank of America closed 63 branches in
7 California and 11 offices in the San Francisco Bay Area,
8 including our neighborhood in Oakland. Although Bank of
9 America has a policy of notifying communities that will be
10 affected by bank closures, their practice has been to
11 notify such communities only after the decision has been
12 made to close the banks.
13 Under the proposed acquisition of Bank of
14 America, its headquarters in San Francisco will cease to
15 exist. Instead, the fate of California, the state who has
16 the largest economy and most diverse population in the
17 nation, will be determined by the NationsBank headquarters
18 in North Carolina over 3,000 miles away.
19 JPRN, our organization, also seriously is
20 disturbed by the practice of NationsBank's disregard. Our
21 investigation indicated -- identified the closing of 35 or
22 14 percent of bank closure -- branch closure during the
23 time in the last two years, thereby the number of branches
24 have been reduced to 213 today in North Carolina,
25 Nationsbank's home state.
26 According to a CRA advocacy group in North
275
1 Carolina, NationsBank has been closing bank branches while
2 opening it's subcity (unintelligible) offices which
3 charges higher interest rate loans to a disproportionately
4 large number of African American and low-income persons.
5 Additionally, Mr. Hugh McColl, Jr., CEO of
6 NationsBank, explicitly stated at one of the meetings with
7 CRA advocacy groups in San Francisco that the decision to
8 close branches is up to NationsBank and then not to local
9 committees. How many branches will be closed or
10 consolidated due to the acquisition of Barnett Bank in
11 Florida by Nationsbank? The total number will be 204.
12 Therefore, we believe that numerous closure and
13 consolidations also would occur in the state of New Mexico
14 and Texas where about 234 NationsBank and 201 Bank of
15 America exist.
16 Branch closing activities are not made at random
17 but selectively. A conspicuous example is seen in
18 NationsBank's activities in its home state. We were able
19 to identify zip code numbers of these 30 closed branches
20 out of the 35 and then it was found that 56.3 percent of
21 the communities where branch closure occurred were
22 predominantly either African Americans or the poor
23 according to zip code census data.
24 Given this history of the NationsBank, we are
25 compelled to believe once the merger takes place that this
26 pattern of branch closure will continue. And the branch
276
1 closure create serious adverse impact which include
2 layoffs, loss of capital access, erosion of a community
3 economic development and also personal services. It is
4 the consumers resident and small business of color and the
5 poor which would face these harmful impacts.
6 And this unless NationsBank discloses their
7 potential branch closing, I urge the Federal Reserve Board
8 not to approve this merger. Such information is necessary
9 to give the public adequate information with which to
10 comment about the merits of this proposal.
11 I am requesting the NationsBank to disclose any
12 intent of branch closure, not only in the San Francisco
13 Bay Area, but also in other parts of the country where the
14 two banks currently offer service. Thank you for giving
15 me my opportunity to speak.
16 MS. SMITH: Thank you.
17 MR. STERN: Honorable committee, my name is John
18 Stern. And the President and CEO of Wesley Housing
19 Development Corporation of Alexandria, Virginia, and I'm
20 here to testify in favor of the merger of NationsBank and
21 Bank of America.
22 Wesley Housing has developed over a thousand
23 units of housing affordable to those with low and moderate
24 incomes in northern Virginia just across the Patomac from
25 our nation's capitol. One of our larger communities
26 containing 162 apartments reputed to be one of the first
277
1 garden apartments in the United States remains as
2 affordable housing because NationsBank lent us over $5.6
3 million to acquire it. But more significant was the help
4 that was provided by their Community Development
5 Corporation which assisted my predecessor in negotiations
6 with Mobil Oil to buy back a $2 million note for 45 cents
7 on the dollar.
8 NationsBank's CDC provided the required $909,000
9 as an equity investment into a partnership that was
10 created to facilitate the purchase of the note. Today we
11 are subsidizing 17 very low-income households at this
12 community costing $32,000 per year out of the rents that
13 we collect there.
14 The supported residents are typically elderly,
15 living on social security, and have lived at this property
16 for over 20 years. With no federal Section 8 subsidy
17 available, these long-time stabilizers of the community
18 could not continue to live at our property without our
19 support.
20 Because NationsBank CDC enabled the preservation
21 of this property and agreed to our internal subsidy
22 program, these 17 households, along with their 145
23 neighbors, who mostly earn very low to moderate incomes
24 were not displaced when Mobil sold the property and are
25 able to live in decent, safe and sanitary housing in one
26 of the highest income areas in the United States.
278
1 Having run two nonprofit housing development
2 companies here in the Bay Area and having administered the
3 Affordable Housing Program for the Federal Housing Finance
4 Board in Washington, I know firsthand the good work of
5 both Bank of America and NationsBank and their CDCs in the
6 affordable housing arena.
7 While some might say that more could be done by
8 both of these institutions or that this consolidation is
9 anticompetitive or will decrease services to communities
10 of color and low incomes, I believe that each has tried in
11 their own part of the country to serve those with special
12 needs.
13 I trust that this combined company will be
14 stronger than the parts and will live up to its commitment
15 to serve the country better with its greater resources and
16 coast-to-coast reach.
17 From my experience, there's little overlap in
18 their present service areas. And unlike the marriage of
19 Citibank and Travelers Insurance, both entities being
20 reviewed today, have weathered the storms of community
21 dissent to emerge stronger and better corporate citizens.
22 These strengths are spotlighted by the new
23 entity's $350 billion lending commitment to the
24 communities most needy groups, 115 billion of which is for
25 affordable housing, and 25 billion for nonprofit CDCs such
26 as Wesley Housing. I applaud that commitment and humbly
279
1 ask your favorable resolution of these two banks'
2 requests. Thank you.
3 MR. LAWSON: Good afternoon. I'm Hank Lawson,
4 the Executive Director of Software Community Development
5 Corporation, a neighborhood based nonprofit housing
6 development corporation located in Dallas, Texas. I'm
7 here to speak in support of the proposed merger.
8 Our neighborhood in south Dallas is classified by
9 the city as a level five neighborhood. On a scale of one
10 to five, with five being the worst, and indicators over 50
11 percent of the residential housing units are in need of
12 substantial rehab, over 50 percent of the residents live
13 below the poverty level and over 50 percent of the
14 households being female head of households. In our
15 neighborhood, those residencies are well over 90 percent.
16 The 1990 median income for the -- strike that --
17 that comprise our target neighborhood are $9,000 and
18 $13,000. This is a neighborhood that until very recently
19 was the domain of the Park Row Posse, a drug gang.
20 In 1993, NationsBank made a long-term commitment
21 to south Dallas. In 1994, our nonprofit corporation South
22 Fair joined with NationsBank to form a joint venture to
23 seek the revitalization of this neighborhood. This is a
24 neighborhood that has been noted for the disinvestment by
25 both the public and