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Public Meeting Transcripts

Public Meeting Regarding NationsBank and BankAmerica

Thursday, July 9, 1998

Transcript of Panel Thirteen


       1              MR. FRIERSON:  Just to clarify one point. 
       2   The comment period was extended by the board.  It
       3   expires today. 
       4              Last week there was a submission sent to
       5   current commenters, and the comment period for the
       6   commenters who received that submission was extended to
       7   July 17th, which is the same day that people appearing
       8   at the meeting today can supplement their comments.  
       9              MS. SMITH:  Thank you for the correction.  
      10              If there are no questions from the panel,
      11   then we'll go on to the next one.  Thank you very much. 
      12              (Pause in proceedings.) 
      13              MS. SMITH:  If we could start with
      14   Mr. Devine. 
      15              MR. DEVINE:  That's me.  
      16              Good afternoon.  My name is Richard Devine
      17   and I'm here on behalf of the Center of Community
      18   Change.  The Center for Community Change is a national
      19   nonprofit organization headquartered in Washington D.C.
      20   that provides technical assistance and research on
      21   behalf of local community-based organizations serving
      22   low-income and predominantly minority constituencies. 
      23              For almost 30 years the center has been
      24   especially active in advising communities groups on
      25   their efforts to develop and implement community
      26   reinvestment strategies designed to stimulate the flow


       1   of private lending and investment to underserved urban
       2   and rural communities. 
       3              The merger of NationsBank and Bank of
       4   America, two of the nations largest banks, promises to
       5   have important and profound implications for the
       6   residence and businesses located in the many markets
       7   currently served by these institutions.  
       8              CDC is mindful of the fact that many
       9   community groups and different markets served by one or
      10   both of these banks have complained about various
      11   inadequacies in their CRA performance records. 
      12              Further, some of these local citizens groups
      13   have also raised questions about whether the proposed
      14   consolidation will result in reductions in lending or
      15   deterioration in the quality of the essential banking
      16   services for their areas. 
      17              In an effort to address some of these
      18   concerns that have been expressed, the two banks
      19   announced on May 20th they would make a ten-year, $350
      20   billion community development commitment.  
      21              While substantial and impressive on its face,
      22   the commitment lacks two important details.  Lacks
      23   important details about how this ambitious effort will
      24   be undertaken, not just for the 22 states now served by
      25   these two institutions, but for two -- new market areas
      26   as well. 


       1              A detailed implementation plan should be
       2   required by the Federal Reserve Board should the
       3   proposed merger be approved. 
       4              Additionally, we believe the merged
       5   institution should be required as a condition for
       6   approval to establish and capitalize a new nonprofit
       7   corporation that would have two principal purposes. 
       8              First, to improve access to and the terms of
       9   credit for low and very low income households and market
      10   areas affected by the proposed merger.  
      11              And, second, to preserve the affordable
      12   housing inventory that is either rapidly being converted
      13   to market-rate properties in places like the greater San
      14   Francisco Bay Area or being left to deteriorate at an
      15   accelerated place in communities where the conditions
      16   for conversion to market-rate housing have yet to
      17   evolve. 
      18              We advance this proposal because past
      19   experience with mergers of lesser scope and magnitude
      20   has demonstrated conclusively that multimillion or
      21   billion dollar loan commitments, however
      22   well-intentioned or implemented, do not address
      23   fundamental issues of income and asset and equality that
      24   permeate our society. 
      25              Also, we believe very strongly that
      26   communities and populations now credit-scored below the


       1   minimum established for participation in regulated
       2   credit and banking markets should be accorded the same
       3   benefits as the senior executives of NationsBank and
       4   BankAmerica who realize great personal gain from the
       5   favorable regulatory ruling.  
       6              With funds equal to those earmarked for the
       7   care and comfortable retirement of senior executives, it
       8   will be possible to acquire, rehabilitate and preserve
       9   for at least an additional 35 years approximately 75,000
      10   affordable housing units. 
      11              It is our understanding that as part of the
      12   proposed merger senior executives of NationsBank and
      13   Bank of America shall receive at no cost to them options
      14   to purchase stock of a new holding company that price is
      15   not available to the general public. 
      16              In addition to this benefit, senior
      17   executives of each institution shall receive lump sum
      18   cash payments and other compensation typically referred
      19   to as golden parachutes.  
      20              A recent 8K filing by NationsBank has stated
      21   that the company expects to incur pre-tax merger and
      22   restructuring items of approximately $1.3 billion.  What
      23   fraction of this total amount will be devoted to exit
      24   cost related to contract terminations and other
      25   reorganization costs has yet to be disclosed. 
      26              But a recent article in the San Francisco


       1   Chronicle stated that the five highest paid BankAmerica
       2   corporate officers would collect a total of $65 million
       3   in severance pay and windfall stock profits if they lose
       4   their jobs, and, and I quote, "A thousand of the senior
       5   managers are also covered by San Francisco banking
       6   giant's generous golden parachute program.  If they all
       7   get dumped, they collectively would be entitled to
       8   severance benefits estimated at well into hundreds of
       9   millions of dollars." 
      10              Our proposed nonprofit organization will be
      11   capitalized from two sources, a cash contribution from
      12   NationsBank and Bank of America and other institutions
      13   in similar circumstances such as Wells Fargo, Citicorp
      14   or Western Travelers, equal to the sum of all exit costs
      15   related to the employment of senior executives and stock
      16   options equal in number and in all other respects to
      17   those granted senior executives of the affected
      18   institutions as part of actions requiring your
      19   regulatory approval. 
      20              The initial cash contribution will match on a
      21   dollar-for-dollar basis the sum of all golden parachute
      22   payments, will allow the new corporation to commence
      23   immediately and the stock options, assuming the
      24   prosperity of the new holding company will provide
      25   funding for future years. 
      26              If these measures are implemented, there


       1   should be no need for additional funding. 
       2              I see that my time has expired.  We have
       3   submitted a written statement for the record here. 
       4   Essentially the position that we are espousing is that
       5   the citizens of the communities affected by this merger
       6   should be treated equally as senior executives of each
       7   of these institutions, and the great personal benefits
       8   they should be received should be shared and distributed
       9   in the communities that they are supposed to serve. 
      10              MS. SMITH:  Thank you very much.  Mr. Lewis. 
      11              MR. LEWIS:  Good afternoon, Madam Chairman,
      12   members of the board, ladies and gentlemen from the
      13   audience.  My name is Al Lewis.  I came here to share my
      14   community's concerns and to ask the board for remedies. 
      15              I am the coordinator for the Save the Bank of
      16   America Ocean Avenue Faxon Branch.  A branch that
      17   represents three neighborhoods and a community of about
      18   50,000 people.  
      19              A year-and-a-half ago this bank closed, after
      20   75 years of profitable operations.  The bank was the
      21   only one that we have in the immediate community.  The
      22   closest Bank of America is about a mile away or two
      23   miles. 
      24              Bank of America told us at a community forum
      25   that they would be happy to work with us to try to get
      26   another bank for the community.  The board of


       1   supervisors in San Francisco had a hearing and they
       2   adopted the resolution in which Supervisor Medina was
       3   the writer, endorser of it, and it was sponsored -- it
       4   was co-sponsored by Supervisor Tang, Behrman{}, Yaki,
       5   Brown and others. 
       6              And essentially what it says was, whereas the
       7   Bank of America, as a good corporate citizen, should do
       8   whatever it can to keep the Ocean Faxon Branch open or
       9   find a substitute financial institution to serve the
      10   neighborhood, now, therefore, be it resolved that the
      11   Board of Supervisors urges the Bank of America to keep
      12   open its Ocean Faxon Branch or find a substitute
      13   financial institution to serve the neighborhood before
      14   they close the branch. 
      15              Well, needless to say, that Bank of America
      16   ignored the community, it ignored the Board of
      17   Supervisors and ignored its valued customers and decided
      18   to close the branch on March 21st, 1997. 
      19              Since that time, we've had downsizing of the
      20   community.  Since the major portion of over 5 million --
      21   I am sorry, over $50 million in deposits were removed
      22   from the community into -- split up into three other
      23   communities where they had existing banks. 
      24              We have no bank.  The merchants on the strip
      25   are stranded for their immediate cash.  Seniors are
      26   affected and impacted because they have direct deposits


       1   of Social Security.  We have no lending, there are no
       2   wire services for the Latino citizens or for the Chinese
       3   citizens who use the wire services. 
       4              I'm also the Committee Chairperson for the
       5   alternative banking, Committee for Alternative Banking. 
       6   When I wrote to Nancy Pelosi, our congress women, she
       7   told me that, "In response to the Supreme Court ruling,
       8   I am co-sponsoring House of Representative Bill 1151
       9   which would codify the national longstanding policy of
      10   the National Union Administrative Board regarding the
      11   field of membership of the federal credit union." 
      12              In other words -- in other words, we tried,
      13   the Committee for Alternative Banking, tried to find a
      14   credit union in our community to ask them to expand
      15   their services so that they could serve the credit
      16   needs, the lending needs of all of the community
      17   citizens.  
      18              However, the initiation of the American
      19   Banking Association in which Bank of America is a major
      20   contributor and a major member of sued the National
      21   Credit Union Association to prevent them from expanding
      22   into the community and expanding so that citizens in the
      23   community might find financial services and products
      24   that the bank had left them without those services. 
      25              So I have a letter here that I say that the
      26   Bank of America is not in compliance with the Federal


       1   Community Reinvestment Guidelines, and, since it has
       2   reinvested little or no monies into the OMI community,
       3   its agency as a nonprofit organization or its schools
       4   and it violates the CRA Act. 
       5              In addition to that, the State of California,
       6   the Attorney General's Office has sued the Bank of
       7   America for fraud and about ten other complaints the
       8   Attorney General has in case No. 968484 in the San
       9   Francisco Superior Court. 
      10              In addition to that, the State of Texas, the
      11   banking regulators are suing the NationBank for
      12   circumventing the Texas banking laws of $5.8 billion
      13   which they took out of the State of Texas and moved to
      14   the headquarters of NationsBank. 
      15              So what really counts here?  What counts is
      16   the public and the Federal Reserve Board and what Allen
      17   Greenspan will do about this merger.  This process was
      18   designed to regulate and supervise national banks to
      19   assure a safe and sound competitive National Banking
      20   system that supports the citizens' communities and
      21   economies of the United States.  It is a process to
      22   bring the banks into compliance with the Community
      23   Reinvestment Act and the expansions of access to credit
      24   capital and the development of affordable housing and
      25   supporting small businesses by providing startup and
      26   expansion finance and working capital. 


       1              Thank you for the opportunity to speak in
       2   behalf of those low-income and disadvantaged and at-risk
       3   citizens in my community, and I hope that the board not
       4   only listens but they will act.  Thank you.  
       5              MS. SMITH:  Thank you very much.  Mr. Omoto. 
       6              MR. OMOTO:  Thank you.  My name is Martin
       7   Omoto.  I am the Executive Director of the California
       8   Nevada Community Action Association representing
       9   community action agencies in both states to provide
      10   direct services to over 4 million low-income people in
      11   both states. 
      12              Currently our association has no position on
      13   the proposed merger, but I am here simply to state and
      14   raise concerns of the proposed merger's impact on low-
      15   income Californians and Nevadans, particularly those in
      16   rural areas. 
      17              First, many of our agencies in California and
      18   Nevada, and they are both public and private nonprofit
      19   agencies, have already and effective partnership with
      20   Bank of America on local community programs.  Our
      21   concern is we don't want to lose that. 
      22              Second, we are also concerned the proposed
      23   merger could mean or could result in bank branches,
      24   especially those in rural areas, and also low-income
      25   areas being closed.  We are concerned that the proposed
      26   merger could result in the reduction or elimination of


       1   services impacting low-income people in Nevada and also
       2   in California.  We are concerned that the proposed
       3   merger could mean the increased -- a result in increased
       4   fees that would make necessary banking services for the
       5   elderly, for the low-income people in the state less
       6   accessible. 
       7              Concern that the proposed merger could impact
       8   the upcoming mandated electronic fund transfer of
       9   benefits for retirees and SSI recipients, millions in
      10   the state who are unbanked and might find it difficult
      11   to get an electronic transfer account. 
      12              Recently in the San Francisco Chronicle, I
      13   believe, the CEOs of both NationsBank and Bank of
      14   America recently wrote their commitment, their pledge
      15   for $350 billion in local community lending is a floor,
      16   not a ceiling. 
      17              Our association is here to make sure or to at
      18   least raise a concern that floor is not a trap door for
      19   low-income people. 
      20              Finally, we want to applaud the Federal
      21   Reserve Board members here that -- of holding these
      22   hearings in the first place and we urge you to hold
      23   additional hearings in California.  I also personally
      24   applaud your stamina.  So thank you.
      25              MR. LEWIS:  I want to extend my thank you
      26   also for the board's patience and stamina.  


       1              MS. SMITH:  Ms. Gibson. 
       2              MS. GIBSON:  Good evening.  My name is Rose
       3   Gibson.  I am a city council woman in the city of East
       4   Palo Alto.  I've also chaired a coalition to bring a
       5   bank to East Palo Palo Alto and most recently chaired
       6   the Special Banking Task Force which represented
       7   community organizations which included the Community Law
       8   Project, which I've listed as representing today. 
       9              I appreciate the opportunity to express the
      10   community's concerns regarding the merger of Bank of
      11   America and NationsBank.  And this clearly here just to
      12   be sure we express the reasons why we have some
      13   concerns. 
      14              Over the past years Bank of America has
      15   endorsed the notion of addressing the banking needs of
      16   low and moderate income customers.  This can be seen in
      17   their community reinvestment projects such as the Jam
      18   and Hoops Basketball Program and the East Oakland Youth
      19   Development Center.  However, East Palo Alto is one
      20   community that Bank of America did not include. 
      21              East Palo Alto is a city with a population of
      22   approximately 25,000, which is predominantly African
      23   American and Latino.  Throughout its history, East Palo
      24   Alto has been greatly underserved by banking
      25   institutions. 
      26              Fifteen years ago many of the bank branches


       1   that once existed in East Palo Alto closed.  Bank of
       2   America was one of the first to leave.  As a result,
       3   residents must travel long distances to deposit their
       4   paychecks, to withdraw cash and to get change for their
       5   businesses. 
       6              Local merchants report that they are unable
       7   to develop the kinds of relationships with lenders that
       8   could result in access to credit.  In addition, the city
       9   reports having difficulty securing loans as well as
      10   other discriminatory lending practices despite federal
      11   Fair Lending Laws.  The Home Mortgage Disclosure Act
      12   data for 1996 suggests that only 68.42 percent of home
      13   loan applications from East Palo Alto were ultimately
      14   approved. 
      15              In addition, local businesses reports having
      16   difficulty securing loans and receiving good rates of
      17   interest on their loans. 
      18              Seventy-two percent of the small businesses
      19   responding to an EPA Can Do, which is a local CDC,
      20   survey reported that financial institutions for small
      21   businesses in the community, they reported that they
      22   were -- they rated them either very poor or poorly. 
      23   Very poorly at 48 percent and poorly at approximately 24
      24   percent. 
      25              Only eight percent of the small businesses
      26   responding to the East Palo Alto Can Do survey reported


       1   that financial institutions met their credit needs. 
       2              Because of this, East Palo Alto developed a
       3   program called the financial services incentive program. 
       4   This program was developed to make it easier and more of
       5   an incentive for banks to locate in East Palo Alto.  As
       6   a result, Bank of America began to provide some grants
       7   to East Palo Alto organizations.  However, this is not
       8   enough.  
       9              Whenever we talked to bank executives about
      10   opening a branch in East Palo Alto, the reasons for not
      11   doing so always boiled down to money and profits.  The
      12   absence of a bank in East Palo Alto is a constant
      13   reminder to residents that they are being deprived of
      14   something that every community deserves. 
      15              Bank of America's merger application states
      16   that low and moderate income markets have proven to be
      17   profitable and valued business segments for both banks. 
      18   However, this has not been our experience.  Bank of
      19   America has refused to open a branch, despite their
      20   knowledge of economic development progress within our
      21   city. 
      22              On June 27th we had our first groundbreaking
      23   ceremony on Phase I of a major retail center with Home
      24   Depot, Office Depot, Comp U.S.A. and Good Guys as our
      25   major anchors. 
      26              It took nearly ten years to get the BofA ATM. 


       1   So we wonder how long it will take to bring a branch to
       2   our bank. 
       3              The merger would facilitate more branch
       4   closures and will also create the job losses.  And East
       5   Palo Alto is a living example of some experiences.  
       6              Since I only have a few minutes left, I'm
       7   going to close by saying that the Community Reinvestment
       8   Act was enacted to encourage banks to meet the credit
       9   and banking service needs of the entire community, which
      10   includes low and moderate income neighborhoods.  And
      11   East Palo Alto is still underserved, and, although Bank
      12   of America/NationsBank have a great plan for community
      13   reinvestment, East Palo Alto does not seem to be
      14   included in that plan and other communities such as
      15   ours. 
      16              So I want to thank the Federal Reserve Bank
      17   for this opportunity and hope they would take into
      18   consideration the banking needs of East Palo Alto and
      19   other communities of low and moderate income within the
      20   State of California. 
      21              MS. SMITH:  If you haven't already done so,
      22   please do submit your full statement for the record. 
      23              MS. GIBSON:  All right.  I have another one
      24   I'll submit to you, not this one. 
      25              MS. SMITH:  Mr. Randolph. 
      26              MR. RANDOLPH:  Good afternoon, Madam


       1   Chairman, members of the committee, the East Palo Alto
       2   Community Alliance and Neighborhood Development
       3   Organization, EPA Can Do for short, wishes to thank you
       4   for the opportunity to present testimony regarding
       5   proposed merger of NationsBank and Bank of America to
       6   the City East Palo Alto. 
       7              My name is Leonard Randolph and I'm the
       8   Executive Director of EPA Can Do, a nonprofit community
       9   development organization whose mission is to enhance the
      10   quality of life for all residents of East Palo Alto by
      11   empowering our members to engage in housing, economic
      12   and community development.  
      13              EPA Can Do was founded in 1989 as a direct
      14   result of community residents organizing to attract a
      15   financial institution to East Palo Alto.  We serve a
      16   low-income population in San Mateo County, one of the
      17   wealthiest counties in the country.  The median income
      18   for our city, approximately 34,000 for a household of
      19   four, so approximately half of the county, $68,600 a
      20   year income.  And 18.6 percent of our population lives
      21   below the poverty -- U.S. poverty level, according to
      22   the 1990 census.  
      23              The private sector and the surrounding
      24   jurisdictions contributed to these conditions through
      25   pillaging of our resources and disinvestment. 
      26              I would like to raise three concerns with


       1   respect to the merger of NationsBank with Bank of
       2   America and the moving of the corporate headquarters to
       3   Charlotte, North Carolina. 
       4              First, as a community development
       5   organization, CDC, that is engaged in affordable housing
       6   development, we are extremely concerned about the
       7   financial potential impact this merger will have on
       8   lending for multi-family housing developments.  
       9              I applaud the ten-year $350 billion
      10   commitment in community development lending and
      11   investment that, as Mr. Hugh McColl described as a
      12   floor, not a ceiling.  
      13              I also commend them on their commitment to
      14   acquire, build or rehabilitate 50,000 affordable housing
      15   units over the same time period and a $115 billion
      16   commitment toward this endeavor.  
      17              To date, however, there has been no
      18   commitment from NationsBank to prioritize loans or lines
      19   of credit for affordable housing development serving
      20   very low-income households, those that are at 50 percent
      21   of median income. 
      22              As the median income of East Palo Alto is at
      23   50 percent of the county, our ability, meaning EPA Can
      24   Do, the ability to provide affordable housing
      25   opportunities for our residents, will be severly
      26   hampered should Nations not support these developments.  


       1              We are equally concerned with this merger the
       2   new CDC went into the California market to develop
       3   housing.  I am well aware that NationsBank CDC has been
       4   extremely successful in developing over 14,000 units,
       5   but having them enter this heavily saturated market
       6   makes me uncomfortable. 
       7              Community-based and grass root development
       8   organizations are uniquely qualified to represent,
       9   develop products and provide services that truly benefit
      10   our communities.  Removing this local connection will
      11   mean that the concerns of the community will give way to
      12   the bottom line of the disconnected outside agency.  
      13              In my opinion, this would lead to the demise
      14   of community-based groups, the displacement of low-
      15   income households and ultimately the destruction of
      16   community.  
      17              Second, Mr. McColl indicated that it was
      18   their intention to, quote, "Employ more people, lend
      19   more money, do more business with minority vendors, be
      20   more active in the community and generally make a bigger
      21   difference in our predecessor institutions," unquote. 
      22              These are noble intentions indeed, and I
      23   admire his commitment to community development.  But I
      24   do have a concern about past performance and future
      25   accountability.  
      26              To make the best difference in our community,


       1   we needs the presence of a neighborhood-based financial
       2   institution with local employees and advisory board. 
       3   The City of East Palo Alto, as my previous speaker just
       4   mentioned, has been without a financial institution
       5   since 1984. 
       6              The former Bank of America site closed in the
       7   1970s is now home for a MacDonalds.  A Wells Fargo site
       8   also closed in the '70s is now home for a number of
       9   nonprofit organizations.  The last bank left the city in
      10   1984 and their building now houses the city's community
      11   development department. 
      12              While East Palo Alto does not have a single
      13   bank branch, we have over 12 locations, including
      14   convenience and liquor stores, where our residents cash
      15   cash checks and get money orders at exorbitant prices. 
      16              Disinvestment by bank's over the past 14
      17   years has dealt a severe blow to our community eroding
      18   the city's economic base, forcing money out of the
      19   community and creating hardship for our residents. 
      20              In June of this year, Bank of America opened
      21   the first ATM connected to a major financial institution
      22   in our community.  And while I applaud this step, I am
      23   ashamed that it took two-and-a-half years to develop it
      24   from whence first discussion occurred with the Bank of
      25   America.  
      26              Regardless of how much banking pattern is,


       1   the surveys will tell you that in-store banking and
       2   electronic banking are what people find convenient, this
       3   does not tell you why check-cashing outlets and pawn
       4   shops flourich in low-income communities.  
       5              In the last ten years, as banks have
       6   abandoned low-income communities, the number of pawn
       7   shops have doubled.  There is plenty of financial
       8   activity going on in our communities, but at exorbitant
       9   prices and in an unregulated environment. 
      10              Since I am short on time, I will skip ahead. 
      11              If NationsBank and Bank of America are going
      12   to reach lending roles in low-income communities, it
      13   needs to be a full participating creating conditions
      14   that make lending possible.  This includes not direction
      15   -- job creation to consumer and business lending, it
      16   also means direct job creation.  
      17              The disproportion of closing of branches in
      18   low-income communities and the refusal to open new ones
      19   impacts the joblessness and spending rates in these
      20   communities and results in stagnant local economies.  We
      21   honor bank's need for best economies in order to invest,
      22   they must then participate fully in the process. 
      23              In conclusion, we do not support the proposed
      24   merger of NationsBank with Bank of America unless the
      25   Federal Reserve requires them to clearly define their
      26   strategy in low-income communities whose deposits they


       1   hold.  
       2              We believe this is the only way the
       3   unscrupulous, unregulated financial system that is
       4   currently the reality in low-income communities will
       5   disappear.  
       6              Additionally, we want NationsBank and Bank of
       7   America to commit specifically to opening fully-staffed
       8   branches in East Palo Alto and other low-income
       9   communities. 
      10              Thank you.  
      11              MS. SMITH:  I don't have our last speakers
      12   name.  
      13              MR. BLIESNER:  On behalf of the City and
      14   County of San Diego, I'd like to express my appreciation
      15   for your perseverance and your willingness to listen to
      16   public input in this merger.  
      17              The Reinvestment Task Force is a quasi --
      18              MS. SMITH:  Could you say your name for the
      19   record?  
      20              MR. BLIESNER:  My name is Jim Bliesner.  I'm
      21   the Reinvestment Director of the San Diego City and
      22   County Reinvestment Task Force. 
      23              The task force is a quasi-public agency
      24   established by the San Diego City Council and the County
      25   Board of Supervisors in 1977.  We have served
      26   continuously since then to monitor lending practices and


       1   to develop strategies for reinvestment. 
       2              The task force is charged by city and county
       3   policy to develop localized reinvestment plans with all
       4   lenders under CRA doing business in San Diego. 
       5              We received that charge as a result of a
       6   long-term analysis which showed significant patterns of
       7   disinvestment by major lenders. 
       8              The task force has had a productive
       9   partnership with the Bank of America defined by San
      10   Diego reinvestment plan developed in 1992.  The
      11   reinvestment activities of the bank have been recorded
      12   annually and reported to the city council and the county
      13   board of supervisors. 
      14              The performance of the Bank of America under
      15   that agreement has been stellar, and in many ways has
      16   set the standard for reinvestment in the San Diego
      17   region.  The activities of the Community Development
      18   Bank in doing affordable housing throughout the region
      19   has been aggressive and innovative in many ways. 
      20              We take issue with some potential dangers
      21   represented by this merger.  Inasmuch as this merger
      22   represents a threat to the use of the Community
      23   Development Bank as a method for doing CRA, we are
      24   opposed.  
      25              Inasmuch as this merger represents some
      26   movement by the merged bank away from recognizing and


       1   validating the crucial benefits of forming specific
       2   local partnerships to eradicate disinvestment, we are
       3   opposed. 
       4              Inasmuch as this merger represents the
       5   potential for higher fees for home loans, higher fees
       6   for checking accounts, for check cashing services, for
       7   small business loans and for other basic banking
       8   services, we are opposed. 
       9              Inasmuch as this merger represents increased
      10   costs, limitations and services, increased interest and
      11   fee rates for micro and small business borrowers, we are
      12   opposed. 
      13              In addition to these concerns and objections,
      14   I'd like to highlight some specific issues with the
      15   performance of the Bank of America in the San Diego
      16   region and seek redress in this merger process. 
      17              As we stated, the Community Development Bank
      18   with the Bank of America has exhibited stellar
      19   performance in its stated goal of doing community
      20   reinvestment. 
      21              What has been missing with the bank has been
      22   the recognition in the mainstream bank that it too has
      23   responsibility for implementing CRA reinvestment
      24   activities.  
      25              For example, of the top ten home mortgage
      26   lenders in the San Diego market, there is an annual


       1   rejection rate over a period of five years for African
       2   American borrowers of about 22 percent.  That's the
       3   average rejection rate for the major lenders. 
       4              Overall, this rate is higher than rejection
       5   rates for other ethnic groups and for Caucasions, but
       6   this rate, high rate, is exceeded by the Bank of America
       7   consistently.  On average over five years the Bank of
       8   America shows a rejection rate of 40 percent for this
       9   population. 
      10              This is almost twice the rate of other
      11   lenders.  It's a striking statistic.  We ask, what
      12   lending policies of NationsBank will mitigate this
      13   problem?  
      14              The Bank of America has shown a consistent
      15   decline in its level of home mortgage lending in
      16   minority communities under 120 percent of median income
      17   between the years of 1992 and 1996. 
      18              Though the Bank of America is always one of
      19   the top ten lenders in this market, if they are compared
      20   with their peers, their market share has shown regular
      21   decline or sporadic behavior at best.  I am not sure if
      22   this is a marketing problem or loan approval policies. 
      23              On small business lending, of course we don't
      24   have a full statistical accounting as yet, our
      25   experience in small business lending is defined by a
      26   series of community-based small business credit needs


       1   assessment.  In those small business credit needs
       2   assessment, what we find consistently, and particularly
       3   in communities served by the Bank of America, is that
       4   the rejection rate for small business loan applications
       5   is higher than regional or national averages in low-
       6   income communities. 
       7              We have been dismayed by the absence of the
       8   Bank of America from key reinvestment initiatives in San
       9   Diego.  They are the only major bank in California not
      10   to invest in San Diego's community development financial
      11   institution.  They have ignored our local banker's
      12   lending consortium. 
      13              In conclusion, the task force has eight
      14   reinvestment plans which has been endorsed and supported
      15   by the City of San Diego and board of supervisors,
      16   endorsed conceptually and financially with the
      17   commitment of public funds to the development or the
      18   enhancement of those plans.  Last year these plans
      19   generated $601 million into San Diego's low income
      20   communities. 
      21              CRA investment in San Diego is saving our
      22   neighborhoods from significant decline.  That represents
      23   a ten-to-one leverage of public funds.  We strongly
      24   endorse the benefit of localized reinvestment planning
      25   by national banks.  
      26              As a famous member of congress once said


       1   about the electoral and democratic process, he said, Tip
       2   O'Neil said, "All politics are local."  We think that
       3   that axiom should apply to the emergence of the national
       4   bank as well.  
       5              Thank you very much.  
       6              MR. FRIESON:  Mr. Devine?  
       7              MR. DEVINE:  Yes?  
       8              MR. FRIESON:  May I ask you a question,
       9   please?  
      10              MR. DEVINE:  Yes.  
      11              MR. FRIESON:  Is it your view that the board
      12   would have the authority, under the Community
      13   Reinvestment Act, to require the type of funding for
      14   your nonprofit organization that you described?  
      15              MR. DEVINE:  It is my view that the board can
      16   impose any conditions it wants in this merger and get
      17   approval from the applicants.  That's simply, those are
      18   the facts of the matter.  
      19              Whether the specific legality of the
      20   Community Reinvestment Act either mandates or requires
      21   or allows you to do that, I am not an attorney, I don't
      22   know.  
      23              I think that if the Board of Governers impose
      24   as a condition of merger that the golden parachute
      25   payments be matched by a contribution to a nonprofit
      26   organization chartered under the purposes that we've


       1   established and similar stock options, that those
       2   conditions would be agreed to.  
       3              MR. FRIESON:  And I have a request from
       4   Mr. Lewis.  Could you provide us with a little more
       5   information about this litigation in Texas over the
       6   deposit?  
       7              MR. LEWIS:  Yes, sir. 
       8              MR. FRIESON:  Do you have a cite to the
       9   litigation?  
      10              MR. LEWIS:  I can provide it for you.  It was
      11   a -- it's a clipping I have in the newspaper. 
      12              MR. FRIESON:  That's fine, if you can provide
      13   it to us. 
      14              MR. LEWIS:  I will.  The Texas regulators are
      15   currently looking into it.  The State Attorney General,
      16   Dan Lundgren, a case that is pending, settlement in the
      17   Superior Court of San Francisco, attacks the issues of
      18   fraud and mispayment, overpayment and the fees -- and
      19   fees. 
      20              MR. FRIESON:  Thank you very much. 
      21              MR. LEWIS:  You are welcome.  Thank you. 
      22              (Pause in proceedings.) 
Last update: December 3, 2010