skip to main navigation skip to secondary navigation skip to content
Board of Governors of the Federal Reserve System
skip to content

Public Meeting Transcripts

Public Meeting Regarding NationsBank and BankAmerica

Thursday, July 9, 1998

Transcript of Panel Three


        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


         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


         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.)















 .                                                                     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 

         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 

         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 

         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 

         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 

         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 

         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 

         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 

         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 

         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 

         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 

         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 

         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.

         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 

         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 

         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 

         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.) 
Last update: December 3, 2010