Home > Banking Information & Regulation > Public Meeting Transcripts > PMT - Agendas July 9-10, 1998
Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Friday, July 10, 1998
Transcript of Panel Twenty-Two
481 19 MS. SMITH: Thank you. Question? Any other 20 questions? Well, thank you very much for coming this 21 morning. And it looks as if we're ready for the next 22 panel. 23 Okay, I think we're ready to start. And we'll 24 start with Mr. Herald. 25 MR. HAROLD: Mr. Harold is still out here. 26 MS. SMITH: Oh. Is there a chair for him? . 482 1 MR. HAROLD: I suppose you would like me to begin 2 now. Thank you. 3 MS. SMITH: Yes, if you would pull the mike 4 toward you. 5 MR. HERALD: My name is Michael Herald and I'm 6 the Executive Director of Housing California. We are a 7 statewide coalition of affordable housing advocates, 8 particularly nonprofit housing institutions, homeless 9 advocates and those who advocate for the poor and for 10 adequate public benefits. 11 We are, as I said, a statewide organization. We 12 operate out of Sacramento, we represent the nonprofit 13 trade associations, housing trade associations, that are 14 around the state. Our organization does a number of 15 things that are important to the field of nonprofit 16 housing. 17 First of all, we advocate in the state 18 legislature for additional subsidy dollars for affordable 19 housing. This year, we were successful in increasing the 20 state low-income housing tax credit by $15 million pushing 21 that figure up to $50 million. We have an additional $35 22 million in the state budget for affordable housing 23 programs, the first new funding for housing this decade. 24 And we've also been the principal sponsors and advocates 25 for making sure the national guard armories are kept open 26 in the winter months for homeless persons. . 483 1 We also sponsor the lowest largest low-income 2 housing conference that we're aware of in the country, it 3 draws over a thousand people annually to Sacramento to 4 hear over -- to attend over 48 workshops during a lobbying 5 visit to the state capitol. We have several major keynote 6 speakers who always come in. We provide over 200 7 scholarships to low-income persons and people of color so 8 that they can come from far distances and attend our 9 conference. We pay all their costs. In 1996, we 10 conducted a voter registration drive that registered over 11 32,000 low-income and homeless persons on sites all over 12 the state. 13 Lastly, we have been one of the principal 14 advocates in the state over the last five years for 15 increasing community investment by corporate -- by 16 corporations. Specifically, we have been very active in 17 organizing and encouraging more community investment by 18 insurance companies and we helped to create the California 19 Organized Investment Network which is a pilot project 20 operating out of the State Department of Insurance which 21 has already generated over $40 million in new investment 22 in California, and we are working closely with them to 23 establish an intermediary called Impact Capital which will 24 actually generate even more, up to $400 million over the 25 next several years for affordable housing and community 26 economic development. . 484 1 The members of our organization are very 2 concerned about the merger of Bank of America and 3 NationsBank. While we don't come here today to 4 specifically oppose the merger, we do want to share with 5 you our concerns. 6 The bank has been -- the CRA bank in California 7 has been an absolutely crucial player to the development 8 of nonprofit organizations in California. They have 9 funded and promoted and provide investment dollars for a 10 number of activities. I'll just touch on a few just to 11 give you an example of some of the things they have worked 12 on and have helped with. 13 The Nonprofit Housing Association of Northern 14 California located here in San Francisco has been the 15 recipient of several grants, one of which was a major 16 project to help which the bank assisted in funding which 17 has been a very big project on NIMBE, the Not In My 18 Backyard Experts, assisting community groups and nonprofit 19 housing developers to overcome barriers and opposition the 20 neighbors have and they've developed a lot of really 21 profound materials that are being used all over the state. 22 The bank has also been very helpful in promoting 23 diversity in the nonprofit housing community. They have 24 funded grants to both the Nonprofit Housing Association 25 and the California Coalition for Rural Housing, that I'm 26 aware of, that have promoted diversity in the nonprofit . 485 1 housing community. Each year they provide funding and 2 those organizations place people of color at nonprofit 3 organizations and really encourage their development in 4 the nonprofit world. 5 Other organizations like the Southern California 6 Association of Nonprofit Housing have also benefited in 7 similar ways. The bank has been very supportive of them 8 over the years. They have been a very big player in 9 marshaling more resources, subsidies, if you will, to 10 build more affordable housing in Los Angeles. The same is 11 true with the Federation for Nonprofit Housing in 12 San Diego, the bank has been there and has been a partner 13 in this work with them. 14 The California Coalition for Economic 15 Development, likewise, they've been our partners in 16 working to increase investment by insureds and they have 17 also been benefited by the bank and have been constantly 18 supported and helped through working on the issues that 19 folks in the economic development world are concerned 20 about. 21 And I guess the way we would capture this whole 22 thing is that the CRA bank has been critical, it's helped 23 us to create partnerships. We talked for many years about 24 how we could create public-private partnerships. In the 25 last decade, the CRA bank has been the master of doing 26 that. They have been in every one of our conferences, . 486 1 they are virtually ubiquitous, you cannot turn around 2 without seeing a BofA CRA person at the conferences 3 working with nonprofit organizations. They have deep and 4 strong relationships built on real business relationships. 5 Lately, we have even seen them increasingly hire 6 out of the nonprofit world and hire to the bank. And so 7 there's such a cross-fertilization now going on between 8 what the CRA bank does and what our nonprofit 9 organizations in California do, that in some respects, I 10 mean, when I go and meet people in the CRA bank, I knew 11 them for years when they were with nonprofit 12 organizations. We all speak the same language. 13 Just to sum up, three things that we're asking 14 the Federal Reserve to do. One is we're very concerned 15 that NationsBank will not have the same relationship with 16 our California nonprofits that we've experienced and 17 enjoyed to date. Particularly worried that there's not a 18 long-term commitment and a firm commitment to funding 19 multi-family housing. And we really want the Federal 20 Reserve to closely examine and make sure that NationsBank 21 continues the work that the CRA bank has done and build on 22 the trust that we have. 23 Second, we are discouraged and concerned that 24 there's not a greater level of charitable giving going to 25 nonprofit organization that sponsor activities. Likewise, 26 we are concerned that there's not enough charitable giving . 487 1 going to the state and regional organizations which are 2 sponsoring the activities that I described above. 3 And then, lastly, I just wanted to say that 4 California's needs, housing needs, are profound. We have 5 seen a series of recent studies that have come out 6 recently that are describing -- that we have the worst 7 rental market in the county. Nine of the twelve worst 8 homeownership markets. And we would strongly encourage 9 the bank to deepen their commitment beyond the $70 billion 10 that they've committed to California. NationsBank coming 11 in and promoting the same thing, even though the size of 12 the bank has doubled, is not appropriate. Thank you. 13 MS. SMITH: Thank you very much. Ms. Raucher. 14 MS. RAUCHER: Thank you very much. My name is 15 Deborah Raucher, and I'm with East Bay Housing 16 Organizations. 17 East Bay Housing Organizations is a coalition of 18 affordable housing advocates in Alameda County. Our 19 membership of over 130 individuals and organizations 20 represents nonprofit developers who create affordable 21 housing and others in the affordable housing fields. 22 My organization provides advocacy and education 23 around the issue of affordable housing, including a 24 campaign to educate people about the benefits of 25 affordable housing. 26 It is no secret that in the Bay Area housing . 488 1 costs are skyrocketing and affordable housing is becoming 2 more and more difficult to find. At developments in 3 Alameda County, families must wait years in order to get 4 access to affordable housing. And as the federal 5 government shrinks from its role in providing affordable 6 housing, many seniors, families and people with 7 disabilities are at risk of losing their housing, 8 exacerbating the already existing crisis. 9 In the East Bay, as in many other regions, 10 nonprofit community-based developers have been at the 11 forefront of addressing this need. Nonprofit developers 12 have created and maintained thousands of affordable units 13 in Alameda County. During the past five years, over 2500 14 new affordable rental units have been created throughout 15 the county. 16 These developments are a vital asset to our 17 community and house our senior citizens, people with 18 disabilities, low-income working families, including our 19 teachers, day-care workers, retail workers and, of course, 20 our children. Such developments are crucial, as well, to 21 neighborhood revitalization efforts and stabilizing 22 neighborhoods. 23 For example, in East Oakland we've seen 24 affordable housing developments revitalize neighborhoods 25 and provide needed services, such as child care, health 26 services and employment training. . 489 1 Time and time again, I've heard stories of 2 families who are able to improve their employment 3 situation, save money for the purchase of a home, see 4 their children's performance in school improving as a 5 result of having access to safe, decent and affordable 6 housing. 7 A tremendous need, however, still exists and more 8 affordable housing is vitally important. And this cannot 9 happen without the participation of financial 10 institutions. 11 Bank of America, as one of the largest financial 12 institutions in the region, has been an absolutely vital 13 component in this equation in our communities and the loss 14 of the resources provided by Bank of America for these 15 purposes would be devastating to the creation of more 16 affordable housing. 17 The reason that I'm here today is that I'm very 18 concerned about the lack of specificity and targeting in 19 NationsBank's recently announced commitment to CRA, as 20 well as their lack of a written commitment. And I would 21 like to urge you to consider requiring NationsBank to make 22 a more specific and written commitment to their CRA 23 requirements as a condition of the merger. 24 Some of the examples of things which Bank of 25 America has provided in this community has been their 26 Community Development Bank where people have developed an . 490 1 expertise about the needs of California's communities. 2 I'm concerned that a bank coming from outside the region 3 won't have the same expertise about the issue of 4 affordable housing and the specific needs of California 5 communities. 6 In addition, the Community Development Bank has 7 been a vehicle for many developers in our county to access 8 money through the Affordable Housing Program operated by 9 the Federal Home Loan Bank. There's been no commitment by 10 NationsBank to continue this program. 11 Other important programs that Bank of America 12 operates that are at risk for being lost is the At Risk 13 HUD Preservation Housing Projects. Expiring HUD projects 14 present an extremely serious threat to our communities' 15 affordable housing stock and a loss of this resource could 16 have broad negative impacts on our communities. 17 In addition, there's been no commitment by 18 NationsBank to prioritize nonprofit housing developers. 19 In Alameda County, nonprofit developers have a level of 20 expertise and commitment to providing affordable housing, 21 and we would hope that NationsBank would make a commitment 22 to utilize this resource. 23 Another concern that I have is the potential for 24 NationsBank to bring their own Community Development 25 Corporation into our communities which will conflict with 26 our already highly successful nonprofit development . 491 1 community and which will not be able to understand and 2 address the needs of our communities as our local CDCs are 3 able to do. 4 Another major concern that I have is the risk of 5 losing Bank of America's corporate giving program. 6 Nonprofits in my community are doing vital and important 7 work to help low-income communities, and a lot of these 8 organizations, my own included, are dependent on 9 charitable contributions. 10 My own organization receives funding from Bank of 11 America Corporate Charitable Giving Program for our 12 operations to educate the general public about the need 13 for affordable housing and the benefits for which 14 affordable housing provides to communities. And as 15 resources for our work become more and more scarce, the 16 loss of this would be devastating to nonprofit 17 organizations in Alameda County. 18 California's communities are unique and there 19 needs to be a specific commitment which addresses the 20 particular needs of our communities. I urge you to 21 consider not allowing this merger unless specific 22 commitments are made by NationsBank. Not only in the area 23 of affordable housing finance and corporate contributions 24 but in targeted home purchase lending, small business 25 lending, community economic development, and consumer 26 issues which affect low-income and minority communities. . 492 1 Thank you very much. 2 MS. SMITH: Thank you. Ms. Haws. 3 MS. HAWS: Good morning. This testimony is 4 submitted on behalf of Sally Gallegos, Executive Director 5 for United Indian Nations which is a job training and 6 placement program that serves Native Americans, young 7 adults 18 and over in the East Bay. 8 United Indian Nations also has a community 9 development corporation which is a nonprofit developer of 10 housing and employment opportunities that are true to 11 Native American cultures and values to promote the 12 economic and social well-being for Native Americans in the 13 San Francisco Bay Area. 14 United Indian Nations has created an urban Indian 15 initiative to acquire and develop property on closing 16 military bases and other surplus federal lands that 17 directly connects low-income communities to housing, 18 employment and revenue generating opportunities. 19 This initiative is a model development mechanism 20 that can be replicated by urban and rural and Native 21 American organizations to mitigate negative impacts on our 22 community from historical federal policies. 23 The Bureau of Indian Affairs Relocation Program 24 initiated in the early 1950s and continued until the early 25 '70s created dramatic changes in the number and character 26 of American Indian populations in urban centers. As a . 493 1 direct result of these federal programs, more than 85,000 2 American Indians moved from reservations to urban areas 3 and many others followed to join their extended families 4 or find better employment or educational opportunities. 5 According to the 1990 U.S. Census, which 6 undercounts Indian people overall, more than 65 percent of 7 American Indians now live in urban areas. In addition, 8 the urban Indian populations have historically been 9 excluded from federal, state and foundation funding 10 targeted for Native American projects located on or linked 11 to -- excuse me, linked to the provision of service or 12 products to reservations rural communities or tribal 13 governments. 14 The San Francisco Bay Area Native American 15 community is one of the largest and fastest growing in 16 Indian populations in the country today. The 1990 census 17 reported more than 40,000 Indians in the Bay Area, 18 although we realize this number is closer to 60,000. 19 Although it's one of the smallest ethnic minority groups 20 in the area, it's the third largest concentration of urban 21 Indians in the United States. The demographic and 22 socioeconomic stresses of the Bay Area Indian community 23 reflects the history that brought Indians to this area. 24 These conditions are exasperated and the following 25 socioeconomic and psychological problems face our 26 community. . 494 1 It is the fastest growing urban Indian population 2 in the country today. The population has increased more 3 than 600 percent since 1960. Following from this, the Bay 4 Area has a disproportionate number of young people, 5 approximately 40 percent of our population are under the 6 age of 25. Considering that suicide is the second leading 7 cause of death for Indian adolescents, the need to 8 meaningfully engage this growing population in moving 9 towards family self-sufficiency is our highest priority. 10 In order to engage these individuals, we have to raise 11 educational levels. 12 Bay Area Indians have considerably lower 13 educational attainments than the general population. In 14 1990, nearly one in four American Indians had not earned 15 their high school diploma. Unemployment rates for 16 American Indians are higher than those of other Bay Area 17 residents. In 1990, nine percent of the community was 18 unemployed, as opposed to five percent for the general 19 population. Employed Bay Area American Indians, about 20 20,000 in 1990, tended to occupy blue-collar positions and 21 very few were managers. Overall, the Bay Area American 22 Indian population has a dramatically low average income. 23 The per capita income in 1990 was $14,000, compared with 24 19,600 for the area as a whole. The proportion of 25 American Indian families living in poverty is 11 percent, 26 was nearly twice as high for all Bay Area families at six . 495 1 percent. Additionally, more than one-third of Indian 2 households headed by women were living in poverty, 35 3 percent, compared to less than 20 percent for the total 4 population. 5 A low proportion of Bay Area American Indian 6 families own property and the denial rates for American 7 Indian mortgage lending has risen steadily. Only 40 8 percent of American Indian households owned homes in 1990, 9 compared to 57 percent of all Bay Area households. 10 United Indian Nations Community Development 11 Corporation currently has three exciting projects in the 12 Bay Area. Transitional housing at the Alameda Naval Air 13 Station. We have an American Indian Museum and Cultural 14 Center which is a regional educational museum at the Oak 15 Knoll Naval Hospital. And the United Oakland Eco Parks, a 16 community driven redevelopment project for 220 acres at 17 the Oakland Army Base. 18 We are not here to oppose the merger between Bank 19 of America and NationsBank. But in order for United 20 Indian Nations to continue to revitalize our community and 21 our neighbors in the East Bay, we need to have continued 22 access to Bank of America's level and range of 23 contributions for nonprofit infrastructure and continued 24 support for projects that target very low-income urban 25 communities. 26 The Bank of America has been a positive CRA force . 496 1 in California institutionalizing community reinvestment as 2 a business through the Community Development Bank. 3 Considerable expertise about community reinvestment as a 4 business and about the needs of the California community 5 has come to be housed at the Community Development Bank. 6 Bank of America's Rural Initiative 2000 has targeted 7 funding to reservations and rural American Indian projects 8 bringing significant new benefits to those underserved 9 communities. 10 A merger with NationsBank should augment the 11 current benefits to low-income communities in California 12 and bring additional funding and range of services for 13 urban initiatives without reducing the current grassroots 14 service provided by Bank of America. Thank you. 15 MS. SMITH: Thank you. Ms. Hill. 16 MS. HILL: Good morning. I'm Reverend Terry 17 McCray-Hill and I'm the pastor of a parish community that 18 has felt the pressures of the closure of a branch of Bank 19 of America that has been in their community for over 75 20 years. 21 The significance of my testimony today is neither 22 pro nor con but is merely a statement from one through a 23 continuum of ministry in that community has heard the 24 complaints of people from low to middle income within a 25 distressed neighborhood that are anguished by the lack of 26 an insured depository institution providing full-scale . 497 1 financial transactions after 75 years of continued 2 services. 3 Just for a brief synopsis of what our community 4 looks like, you've probably heard testimony regarding this 5 neighborhood over your course of proceedings, but it is 6 the OMI, which stands for Oceanview Merced Heights in 7 Ingleside. This community is a potpourri of over 20,000 8 low and middle class residents and has traditionally been 9 underserved due, in part, to being included in the 10 community immediately adjacent to them which is 11 comparatively wealthy in proportion. 12 Based on the 1990 census, our data indicates that 13 OMI residents are 41 percent African American, 26 percent 14 Asian-Pacific Islanders, 16 percent Caucasian, 11 percent 15 Latino, and 6 percent others. If we look at that in terms 16 of the children and youth in that community, one out of 17 every four persons is a child under the age of 18. 18 Many of the residents and merchants located 19 within this community were severely inconvenienced by the 20 closure of the Ocean Avenue/Faxon branch of BofA. 21 Discussions ranging from the disadvantages of a 22 full-service financial institution in the life of the 23 community, even to those discussions concerning life after 24 closure, have persisted since the announcement of a 25 possible closure in 1997. 26 My purpose for being here today is merely to say . 498 1 that, though distressed, this community has found unity 2 and hope within its diverse ethnic and socioeconomic 3 mixture and would benefit greatly from programs sponsored 4 by BofA that provide stress, economic, development and 5 other ways of mitigating any perceived differences in risk 6 and return between low income, minority and distressed 7 neighborhoods and other neighborhoods as referenced in the 8 Community Reinvestment Act of 1997. 9 What can we do and what shall we look forward to 10 Bank of America continuing to provide? We look forward to 11 programs that stress investment for low income, that 12 stress how to save so that we now see capital gains, as 13 opposed to just merely looking for a financial institution 14 as a place for the cash and return of checks. 15 We hope that the token and pledge made by Bank of 16 America will be carried out invisible in this community 17 should the merger occur between NationsBank Corporation. 18 I thank you for your time and I look forward to 19 seeing the fruits of your labor in collaboration with 20 community, not only across California and this nation but, 21 in particularly, in OMI. Thank you. 22 MS. SMITH: Thank you very much. Mr. Bivens. 23 MR. BIVENS: Good morning. Presiding officer and 24 members of the panel, my name is Bob Bivens and I am a 25 member of the National Board of Directors and President of 26 the Stockton, California branch of the National . 499 1 Association for the Advancement of Colored People. 2 Generally known as the NAACP. 3 I appreciate the opportunity to come before this 4 body today to give testimony expressing concern and 5 opposition for the public record regarding the proposed 6 acquisition of Bank of America Corporation by NationsBank 7 Corporation. And to quote our chairman of the Board of 8 Directors, the Honorable Julian Bond, bank mergers need to 9 be opposed when banks do not address the specific needs of 10 minorities and the poor. 11 The NAACP was founded in 1909 and we are the 12 oldest civil rights organization in America with over 200 13 units in California and over 1700 units across this nation 14 and in several countries abroad. The NAACP has a long 15 history of fighting for civil rights, economic and 16 community development and self-sufficiency for African 17 Americans and other ethnic minority groups and all 18 disenfranchised people in America. 19 While we remain focused on our founding 20 principles, we have in recent years taken a more 21 aggressive and proactive approach to achieving economic 22 and community empowerment. 23 Some of our concerns are the $350 billion 24 announcement, while is an impressive sum of money, 25 nonetheless, it lacks the specificity and targeted lending 26 service and investment components needed in a full . 500 1 community reinvestment commitment. More specifically, it 2 does not address the critical needs of the California 3 communities. 4 The banks have refused to make specific and 5 meaningful written commitment to California. They have 6 verbally told me and the national board -- as a national 7 board member representing the NAACP for the State of 8 California and the Stockton branch and members of the CRC 9 in meetings that they are allocating approximately $70 10 billion to California, the same 70 billion already 11 allocated to this state under the 1997 Bank of America 12 $140 billion lending goal. In other words, the banks have 13 not committed one additional penny to California and that 14 will be the state that's most impacted by this merger, 15 that will lose the headquarters of the largest bank and 16 will see the state's -- Bank's successful community 17 reinvestment program dismantled. 18 No written commitment to provide specific 19 products and services targeted at the unique needs and 20 priorities of California's diverse regions and people. 21 There is no written commitment to establish a 22 floor goal, or targeting, for lending in this area and 23 specifically the Central Valley of California for small 24 businesses nor any commitment to target loans or lines of 25 credit of 50,000 or less to small minority-owned 26 businesses. . 501 1 There is no written commitment to prioritize 2 nonprofit housing developments which will keep housing 3 developments at the greatest level of affordability for 4 the longest period of time. 5 NationsBank has a CDC which develops its own 6 housing developments. The California branches of the 7 NAACP are concerned that, were it to function in a similar 8 manner here in California, it would conflict directly with 9 the state's thriving infrastructure of nonprofit housing 10 developments. In negotiating meetings with the banks, the 11 California State Conference of the NAACP and CRC members 12 have requested that NationsBank only do investment and 13 lending but no development in California. NationsBank has 14 categorically refused to make such a commitment. Although 15 the NAACP has an ongoing relationship with NationsBank 16 with our Community Development Resource Centers, this has 17 no bearing on California and Bank of America has not been 18 agreeable to establish a similar type program. 19 There's no written commitment to continue Bank of 20 America's program of appointing a liaison on community and 21 fair housing issues. 22 There's no written commitment to develop a 23 program to provide venture capital to minority-owned 24 businesses, especially those located in the distressed and 25 rural areas of California. 26 There's no evidence to adopt a commitment to any . 502 1 written goals or purchasing a certain percentage of goods 2 and services consumed in California's minority-owned 3 vendors in California. 4 I'm going to skip over a lot of this, I'll be 5 submitting it to the record. Regarding the proposed 6 acquisition of Bank of America Corporation, the NAACP 7 California State Conference of Branches and myself as an 8 elected member of the board of directors from California 9 stand ready as resources to ensure that certain goals are 10 met and matters are not overlooked if a merger of the two 11 institutions goes forward. 12 We are extremely concerned about the consumer 13 protection, competition and economic expansion. 14 Successful and effective mergers are to lower costs, 15 improve product quality or enhance efficiencies. The 16 proposed new bank's commitment of 350 billion in community 17 development lending and investment over the next ten years 18 is an indication of an expected enhanced delivery of 19 services resulting from a merger. 20 350 billion represents the largest community 21 development commitment ever announced by a financial 22 institution. This is an opportunity for organizations 23 like the NAACP to challenge this bank and an opportunity 24 for the new bank to live up to the bank's chartered role 25 as an economic leader in the communities. Again, thank 26 you for the opportunity to appear before you today. . 503 1 MS. SMITH: Thank you very much. Mr. Prince. 2 MR. PRINCE: Chairperson Smith, members of the 3 board, thank you for the opportunity to testify today. 4 My name is Chuck Prince, I'm the Executive 5 Director of the Southeast Idaho Council of Governments. 6 I'm not from California -- actually, I was raised in 7 California but I'm one of the few members of the panel 8 today that are here that isn't from a California 9 organization. I'm here today representing the National 10 Association of Development Organizations, NADO. 11 I'm here to express NADO's conditional support 12 for the proposed merger. NADO is a national association 13 of regional development organizations serving rural and 14 small metropolitan communities throughout America. The 15 association, a public interest group founded in 1967, 16 provides its members with training, information and 17 representation and has been a leader in promoting the 18 interests of America's frequently forgotten small towns 19 and rural regions. 20 Regional development organizations are 21 multi-county service delivery providers that pool 22 otherwise thin local resources across a region and are 23 catalysts for cooperation between citizens and the public 24 and private sectors. Most of America's rural towns -- 25 rural areas and small towns which are home to over 77 26 million people are sreved by regional development . 504 1 organizations. One of the most important functions of 2 these organizations is capitalizing and managing revolving 3 loan funds that serve the credit needs of small high risk 4 businesses unable to obtain loans on their own for private 5 commercial lenders. Often, these revolving loan funds are 6 the only available non-commercial source of credit, so 7 they play an important role in local economic development. 8 This brings me to the focus of our concerns and 9 our conditioned support for the proposed merger. The most 10 compelling reason we feel this merger should be approved 11 is the $350 billion ten year commitment to community 12 development lending made by NationsBank/Bank of America on 13 May 20, 1998. Simply put, this commitment is 14 extraordinary and will have a long-reaching impact both in 15 the community served by the merged bank and in 16 establishing a benchmark for future bank mergers. 17 However, even with the $350 billion commitment, we feel 18 the merger should be approved with very specific 19 conditions. 20 First, that the Bank of America Community 21 Development Bank be retained and expanded in both mission 22 and function. The Community Development Bank is unique. 23 Its vision statement which reads, in part, to support 24 community growth and prosperity by being the catalyst for 25 or by forming public/private partnerships for funding, has 26 led directly to a work program which loaned over $560 . 505 1 billion -- excuse me, $560 million for affordable housing 2 in 1997. The Community Development Bank's great success 3 is attributable to its outreach to nonprofit housing 4 development network as a pool of partners and borrowers. 5 And recognizing that the affordable housing lending 6 process requires specialized skills, many of the Community 7 Development Bank's 300 staff were recruited from this 8 nonprofit network. The NationsBank/Bank of America 9 Corporation $350 billion commitment includes $115 billion 10 for affordable housing. The only logical steward and 11 conduit for these funds is the Bank of America Community 12 Development Bank. 13 Two, using the Bank of America Community 14 Development Bank's affordable housing development 15 activities as a template, the merged bank should create an 16 entity dedicated solely to community economic development. 17 Just as the Community Development Bank has reached out to 18 the nonprofit housing development corporations for 19 affordable housing partnerships, this new entity should 20 reach out to the community economic developing network, 21 including regional development organizations, for business 22 and job creation ventures. Only by making an 23 organizational and structural commitment to the community 24 economic development will the merged banks' actual lending 25 and investments come close to matching the promises of its 26 May 20th, 1998 press release. . 506 1 Three, we commend the NationsBank/Bank of America 2 $10 billion commitment to rural America. We ask that the 3 purposes of this rural pool be sufficiently broad to 4 include financing for community facility and 5 infrastructure improvements. Many small cities, special 6 districts and counties often find it difficult to finance 7 city halls, jails, water and sewer systems, community 8 centers and streets. Participation of the new BankAmerica 9 in meeting these credits needs would be a valued 10 contribution in efforts to better rural America. 11 Four, the merged bank has also pledged $180 12 billion for small business lending and $25 billion for 13 economic development. To say that these are substantial 14 amounts of needed capital is a gross understatement. 15 However, we're greatly concerned that the lion's share of 16 these funds will be used for government insured loans. 17 While these loans are an important tool in job creation 18 efforts, they truly represent little risk to the bank and 19 only serve a very narrow spectrum of the needs of the 20 small business credit continuum. 21 In order for these funds to have greatest impact, 22 we believe a large portion of these funds should be 23 targeted towards direct loans to higher risk borrowers 24 including business start-ups, investments in and grants to 25 revolving loan funds of regional development 26 organizations, creation of an accessible secondary market . 507 1 for loans made by development organizations through the 2 revolving loan funds, creation of a set-aside for small 3 business lending and investment in rural and small 4 metropolitan communities for ventures of any size. 5 A recent NationsBank/Bank of America publication 6 calls for only making loans to ventures creating more than 7 25 jobs in rural or lower and moderate income communities. 8 This limitation is artificial and simply doesn't reflect 9 the job creation activities in rural America where three 10 and four employee ventures are the rule and 25 employee 11 ventures the major exception. 12 And four, the development of venture capital 13 pools at regional development organizations and other 14 regional multi-state intermediaries. 15 Only by adding these higher risk activities in 16 with the safety of government insured loans will the 17 merged bank begin to approach meeting the credit needs of 18 small world businesses. 19 In conclusion, Chairperson Smith, NADO 20 conditionally supports this merger. As stated at the 21 outset, a $350 billion commitment to community development 22 lending and investment is unprecedented. However, 23 translating funding commitment to real impact requires a 24 focused plan of action. 25 This plan should contain, one, retention of the 26 Bank of America Community Development Bank. Two, creation . 508 1 of an equivalent to the Community Development Bank 2 focusing on community economic development. Three, a 3 vision of the community development needs of rural 4 America's broad enough to include infrastructure finance. 5 And four, an approach to small business and economic 6 development lending that features a rural set-aside and a 7 mix of both government insured and non-traditional higher 8 risk loans and investments. 9 Thank you for the opportunity to testify today. 10 MS. SMITH: Thank you very much. Questions? 11 MR. FRIERSON: I'd like to thank all the 12 panelists for coming here and giving us this very 13 important information, and to remind you that if you do 14 have written statements you can submit them for the record 15 at the table outside , and we'll make sure they're 16 included as part of the record, it will be reviewed in 17 this application. Thank you very much.
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