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Public Meeting Transcripts

Public Meeting Regarding NationsBank and BankAmerica

Friday, July 10, 1998

Transcript of Panel Twenty-Six


       1              MR. BLASDELL:  I have a prepared statement
       2   for anybody that wants them or needs them.  
       3              Introduction:  NEH and SALT, the Suburban
       4   Alternatives Land Trust, are two affiliated Marin
       5   County-based nonprofit community development and
       6   affordable home finance corporations.  I was a founder
       7   of NEH in 1978 and in 1993 of SALT, which incorporated
       8   this year, 1998.  As a developer/builder of new homes
       9   for almost two decades, I have known the difficulties of
      10   seeking and securing the cash and the credit needed to
      11   build and finance subdivisions and individual homes,
      12   sales and purchases, we produced over 2,500 homes, more
      13   than one in four affordable.  
      14              I particularly have had extensive experience
      15   assisting low-income first-time home buyers buying their
      16   first home in Marin, one of our nations most
      17   unaffordable and difficult own housing markets, and more
      18   recently with CASA HOME Loan contracts in ten Bay Area
      19   cities.  
      20              Support for the merger:  On behalf of NEH and
      21   SALT and the many low-income clients and working
      22   families we have served over the last two decades, I
      23   support the merger as I understand it from the publicly
      24   available materials that have been provided to me and to
      25   us.  
      26              At this time, as this is the first merger


       1   discussion in which I have participated, I am unclear
       2   about the roles and process after today's hearing is
       3   closed.  However, I offer the following additional
       4   comments for your considered action:  
       5              Whether or not the Federal Reserve Bank of
       6   San Francisco retains review and control over subsequent
       7   CRA evaluations of New Bank, as I referred to this, I
       8   think clear and adequate written direction is important
       9   now in case any other Federal Reserve Bank gets
      10   jurisdiction.  This can assure that California's diverse
      11   credit and banking needs are properly and adequately
      12   understood as well as provided for by those farther
      13   away, measurable and profitable result must be the
      14   standard achieved by the New Bank from a perspective of
      15   its new stockholders, any new regulators and ultimately
      16   by the number of new customers they secure beyond all
      17   existing customers they retain.
      18              Second item.  New Bank should make adequate
      19   written commitments establishing the numerical targets,
      20   goals and/or minimum CRA activities for California,
      21   e.g., make separate California commitments especially
      22   for program areas such as charitable giving, foundation
      23   operations and maintaining the state/community bank
      24   staff headquarters here.
      25              I would like to say on a personal and more
      26   anecdotal level that the Federal Reserve Bank is who I'm 


       1   speaking to directly obviously very directly in this
       2   hearing, not the two banks involved in the merger.  But
       3   I want to thank the Federal Reserve Bank for being so
       4   helpful with the programs that our nonprofit has
       5   developed throughout the Bay Area recently,  
       6              There is an attachment here from your
       7   community for quarterly from '96, it has really been
       8   helpful.  
       9              We have never done business with Bank of
      10   America, although I am a valued customer, have a
      11   personal account, over 25 years in my personal accounts. 
      12              We have brought projects to Bank of America,
      13   we have been supported with grants, we have had people
      14   volunteer from Bank of America, but we have never done a
      15   deal with Bank of America.  So I have no business
      16   conflict or position with respect to why I support the
      17   merger.  
      18              I would like to say for having been -- I'm a
      19   fifth-generation Californian, my father's family came
      20   here from Scotland via Boston a decade of the Gold Rush. 
      21   And I think the 33 million people that came after that
      22   have made California a very powerful, wonderful, nation
      23   and state.  
      24              I think the efforts of Mr. Giannini in
      25   creating the Bank of Italy here in San Francisco was
      26   very fortuitous and powerful.  


       1              For those of you that haven't had the
       2   opportunity to read the biography of the bank, the story
       3   of Bank of America, into the record should go this
       4   publication done in 1954, written by Mark Heath James
       5   and Betsy Jessie Rollin James, and it sets forth that
       6   this is the completion of A. P Giannini's dream from
       7   North Beach where people not being served because they
       8   were the Italian community in the wrong pat of town.  I
       9   think this in fact completes the dream of the Trans
      10   American vision 
      11              MS. SMITH:  Mr. Bonnett
      12              MR. BONNETT:  Thank you.  I want to thank the
      13   Federal Reserve Bank for providing this forum to testify
      14   in the proposed merger.  
      15              My name is Alvin Bonett.  I am here
      16   representing Ecumenical Association for Housing.  It's a
      17   nonprofit housing development housing corporation that's
      18   been in existence for some 30 years.  Our headquarters
      19   are in the San Rafael, California.  Just a comment that
      20   the corporate name may be a little misleading, we're not
      21   a religious organization.  
      22              We have over the years developed more than 50
      23   affordable properties throughout many different kinds of
      24   communities in California and Hawaii.  Those are home
      25   ownership type developments, rental developments for
      26   seniors, family, disabiled, a really wide-ranging number


       1   of properties and residents.  The properties so far
       2   total more than a quarter of a billion dollars that we
       3   have developed.  Most importantly, all of those
       4   permanently affordable.  
       5              We have done business with many different
       6   lenders over the years and we consider the Bank of
       7   America Community Development Bank to be a leader in
       8   lending in affordable housing.  We just don't see a
       9   whole lot of comparable structure there, which I want to
      10   comment.  
      11              EAH itself is not opposed to the proposed
      12   merger, nor do we support it, but there are two remarks
      13   that I do want to make.  One about the community
      14   development bank itself.
      15              We found that in comparison that the
      16   structure of that bank is really very special.  It has
      17   the most appropriate structure in terms of being
      18   vertically integrated and being able to serve our needs
      19   as a developer and manager of affordable housing.
      20              That structure allows them to make rapid and
      21   accurate decisions on credit and that is not shared by
      22   all lenders.  They are able to quickly distinguish
      23   between routine matters and very important matters in
      24   lending.  That is also not shared by all lenders when it
      25   comes to affordable housing. 
      26              Their way of working with credit decisions


       1   and being able to speak as almost a single voice from
       2   top to bottom is not shared by many lenders today.  They
       3   understand the business of nonprofit housing
       4   development, which, in California, is a very large
       5   activity.  They also understand the lower-income housing
       6   markets, which is not shared by all lenders.  
       7              They understand California, which is really
       8   like four different states.  The Northern California,
       9   Southern California, the coastal and the inland all
      10   operate in -- as market areas very differently from each
      11   other and have to be handled differently. 
      12              The other point that I wanted to comment on
      13   is that Nationsbank has its own community development
      14   corporation, which, if brought to California, will
      15   provide a competitor to organizations like ourselves and
      16   other private and nonprofit developers here.  That gives
      17   us a great deal of concern given the level of
      18   competition. 
      19              In conclusion, I want to say that the merger
      20   should not diminish nor compromise the business
      21   structure in the capacity of the Community Development
      22   Bank.  It's done very, very well and I'd hate to see
      23   anything change that. 
      24              Secondly, the merger should not produce
      25   business activities that compete with or compromise the
      26   existing client relationships that we share with the


       1   Community Development Bank. 
       2              Thank you all once more.
       3              MS. SMITH:  Thank you very much.  
       4              Ms. Guilfoil. 
       5              MS. GUILFOIL:  Good afternoon.  My name is
       6   Martina Guilfoil.  I am Executive Director of Inglewood
       7   Neighborhood Housing Services in Inglewood, California. 
       8              INHS is one of 181 member organizations of
       9   the National NeighborWorks Network, a network that works
      10   to revitalize, urban, suburban and rural neighborhoods
      11   across America.  
      12              NeighborWorks organizations create healthy
      13   communities by working with residents, business peoploe,
      14   government officials and and other partners.  Together
      15   these partners create new housing, rehabilitate existing
      16   housing, develop multi-family housing and help lower-
      17   income families become homeowners.  
      18              NeighborWorks also identify and help develop
      19   resident leaders, stimulate residents to work together
      20   to improve the appearance and safety of their
      21   communities and work with other civic organizations and
      22   solve social problems and improve the quality of life in
      23   their communities. 
      24              Today I'm here on behalf of the National
      25   NeighborWorks Housing Network, a membership organization
      26   of NeighborWorks organizations.  NNHN acts as an


       1   advisory group on public policy that promotes community
       2   development activity in our communities.  Since the
       3   primary activity of most NWOs is to channel loan
       4   capital, mostly through conventional lending
       5   institutions to lower-income communities and borrowers,
       6   bank modernization is a concern to us. 
       7              NNHN wants to ensure that reinvestment and
       8   access to flexible lending and credit products continues
       9   to happen through this modernization process in our
      10   neighborhoods.  To this end, we have hosted several
      11   meetings with Bank of America and NationsBank to discuss
      12   partnership opportunities that will help them deliver on
      13   their $350 billion commitment to the community.  
      14              These opportunities include multi-family
      15   lending and investment, first and second mortgage
      16   lending for home ownership, investments and
      17   participations with local NWOs and home ownership
      18   counseling and education. 
      19              Presently, there are at least 60 NWOs
      20   operating in 22 states that have formed partnerships
      21   with Bank of America and NationsBank or other
      22   institutions acquired by one of them.  In addition,
      23   there are approximately 50 other NWOs that exist in
      24   these bank service areas that could enter into similar
      25   partnership. 
      26              From 1995 to 1997 the NeighborWorks network


       1   captured a total of $1.3 billion in direct investment. 
       2   Of that total direct investment, 65 percent or 863
       3   million occurred within the 25 states where Bank of
       4   America and NationsBank operate.  Seventy-two percent of
       5   that 863 million was invested in home ownership units at
       6   an average cost of $69,203.  The remaining investment
       7   was for rental and mutual housing.  And, just to note,
       8   60 percent of all of the network's first mortgage
       9   borrowers are minority households. 
      10              NNHN is supportive of this merger providing
      11   this does not does not dilute the cumulative efforts
      12   that the two banks would make independently of one
      13   another, but, in fact, leads to a significant expansion
      14   and investment in distressed communities.  
      15              NNHN believes Bank of America and NationsBank
      16   will need to develop strong partnerships in order to
      17   deliver on their $350 billion commitment. 
      18              In addition, in order to increase their
      19   lending rates to minority household borrowers and
      20   maintain deliveries of special niche products that are
      21   so vital to our local communities, we encourage strong
      22   partnerships to be developed so that lending can occur
      23   at a local level.  
      24              MS. SMITH:  Thank you very much. 
      25   Mr. Gottschall. 
      26              MR. GOTTSCHALL:  Good afternoon.  My name is


       1   Bruce Gottschall and I am Executive Director of
       2   Neighborhood Housing Services of Chicago, one of the
       3   member organizations of NeighborWorks network. 
       4              Just to give you a little background on NHS
       5   in Chicago, we are a 23-year-old partnership of
       6   residents, lenders and in the city government.  We are
       7   actively working in 18 differrent neighborhoods in the
       8   City of Chicago and partnered with about 200 financial
       9   institutions in that area.  
      10              Ourselves directly have been involved making
      11   10,000 loans for housing rehabilitation, home
      12   improvement, home ownership and community development
      13   over that 20-years-plus activity impacting more than
      14   20,000 units.  We're involved nationally with the
      15   NeighborWorks campaign for home ownership and with the
      16   Neighborhood Housing Network. 
      17              In Chicago, the Bank of America and its
      18   predecessor organizations, Continental Bank and Bank of
      19   America Illinois, have been leaders in assisting NHS of
      20   Chicago to serve the credit and community development
      21   needs of an increasing number of people and
      22   neighborhoods over the last 23 years.  
      23              This is one example, ten years ago, then,
      24   Continental Bank made a $20 million commitment at
      25   below-market rates to develop the Chicago home ownership
      26   program, which assisted NHS of Chicago to become


       1   Illinois now only not-for-profit mortgage bank and
       2   substantially increased our capacity to be a community
       3   development lender.  
       4              Five years ago, when Bank of America entered
       5   the market, they expanded that commitment to the home
       6   improvement program to $40 million and invested in the
       7   development of a new NHS operation had the West Humboldt
       8   neighborhood, assisted in funding increased commitment
       9   to NHS's lending capacity, to market the lending
      10   programs, to assist in funding the high interest --
      11   excuse me, high risk revolving loan fund -- it's not
      12   high interest, it's usually low interest -- to support
      13   the NHS operation in other Chicago neighborhoods.  
      14              Bank of America community development staff
      15   have provided personal leadership in the expansion of
      16   NHS staff activity in Chicago neighborhoods.  Among
      17   other things, their consultation in financial planning
      18   prepared NHS to submit and be approved for matching
      19   funds as a community development financial institution. 
      20              In Chicago, the Bank of America's leadership,
      21   involvement, investment, lending and grant relationship
      22   has produced benefits for neighborhoods and families. 
      23              In past mergers, the new entities have
      24   increased their resources to NHS of Chicago and to the
      25   community.  
      26              As NHS of Chicago continues to fulfill its


       1   community development and lending commitments in the
       2   neighborhoods, our expectation, based on past
       3   experience, is that Bank of America and NationsBank will
       4   increase resources based on their size and institutional
       5   capacity.  
       6              We're supportive of this merger because of
       7   our very positive history and working relationships with
       8   Bank of America in Chicago.  In addition, our
       9   discussions with Bank of America and NationsBank
      10   representatives make us optimistic about their
      11   commitment to communities and to partnerships. 
      12              The $350 billion commitment demonstrates this
      13   in the interest in developing local partnerships give
      14   specific avenues that these resources can be delivered
      15   in local communities.  Because of this, we believe it
      16   will result in increased resources for community
      17   development. 
      18              Community development, by its very nature, is
      19   local.  In order to fully transform those underserved
      20   neighborhoods, like the neighborhoods which NHS
      21   operates, specialized programs and products are needed
      22   that address very specific problems that cause decline. 
      23   The NeighborWorks network is actively engaged with Bank
      24   of America and NationsBank in developing innovative
      25   partnership to bridge this gat and creative mechanism
      26   responive to local communities. 


       1              We are working with Bank of America and
       2   Nations to strengthen and enhance the national
       3   commitment as well as, extremely importantly, build on
       4   local partnerships and strengthen their capacity. 
       5              We are confident this working relationship
       6   and the commitment to community development and
       7   innovative local and national partnerships will result
       8   in effective and additional resources. 
       9              NHS appreciates the opportunity to testify at
      10   these hearings because it focuses the attention on the
      11   need to sustain and enhance local community development
      12   efforts and resources.  Thank you 
      13              MS. SMITH:  Thank you very much.  Ms. Reese. 
      14              MS. REESE:  Thank you and good afternoon.  My
      15   name is Kate Reese.  I'm the executive director of
      16   Neighborhood Housing Services of St. Louis.  Our
      17   organization is one of 181 nonprofit and community-based
      18   housing corporations of the NeighborWorks networks. 
      19              Neighborhood Housing Services of St. Louis
      20   provides services to low-to-moderate-income households
      21   in the form of home repair loans and home buyer and
      22   insurance education to allow for successful home
      23   ownership experiences in neighborhoods throughout the
      24   St. Louis region. 
      25              The board of directors of Neighborhood
      26   Housing Services of St. Louis is in support of the


       1   merger of Bank of America and NationsBank, due in part
       2   to a leadership role that NationsBank has played in
       3   redevelopment efforts in the St. Louis area. 
       4              Since their acquisition of Boatmen's Bank,
       5   NationsBank has put together a team of St. Louis's in
       6   their community investment and development departments
       7   that already has made an impact in St. Louis and with
       8   our particular organization. 
       9              I really would like to stress the importance
      10   of having the right St. Louis since taking the right
      11   job.  I think that was key to the success they've had in
      12   the last year. 
      13              Last year and again this year, NationsBank
      14   has been one of our top private-sector partners and has
      15   provided important funding to enable us to market our
      16   product, undertake crucial planning efforts and grow our
      17   home ownership program to provide critical, one-on-one
      18   counseling and education to make the goal of home
      19   ownership a reality. 
      20              We expect to have more than doubled our
      21   capacity during 1998 with the assistance of NationsBank
      22   and our outreach program.  
      23              On the national level, I have been involved
      24   in some preliminary conversations with both Bank of
      25   America and NationsBank.  They look more than promising
      26   towards the end of, one, increasing development and


       1   production of affordable housing units, two, making
       2   mortgages available to low and moderate income families
       3   to help stabilize our neighborhoods, and, three provide
       4   the important counseling and education that ensures that
       5   the home ownership experience is successful for both the
       6   family and the community in which they choose to buy. 
       7              With the local track record in St. Louis and
       8   the promise of a very comprehensive plan for the future,
       9   I say, without a doubt, that I look forward to the
      10   merger of NationsBank and Bank of America and the
      11   commitment they are making to the work of community
      12   development organizations across the country. 
      13              It was exactly one year ago, and maybe to the
      14   day, when Nations officially opened their doors in 
      15   St. Louis.  I have to admit that those of us in the
      16   nonprofit world in St. Louis were a little bit nervous. 
      17   We'd had a very good track record with Boatmen's in the
      18   past and our nerves were on edge. 
      19              But I can truthfully say that nations has
      20   lived up to prior commitments made by Boatmen's, and,
      21   indeed, exceeded their goals in the past year in
      22   reinvestment in our community.  
      23              Thank you.  
      24              MS. SMITH:  Thank you very much. 
      25   Ms. Wagstaff. 
      26              MS. WAGSTAFF:  Thank you.  My name is Fran


       1   Wagstaff, and I'm pleased to be here this afternoon
       2   representing the Nonprofit Housing Association of
       3   Northern California, NPH.  
       4              NPH is a membership organization of some 500
       5   members, including regional and community-based housing
       6   nonprofits, service providers, consultants, lenders
       7   public agencies and other parties involved in the
       8   production of management of affordable housing in
       9   Northern California. 
      10              I'm a nonprofit developer and a member and
      11   past president of NPH.  As director of Mid Peninsula
      12   Housing Coalition, I secured the first CRA multi-family
      13   loan in California by the Bank of America for
      14   multi-family housing and I've used Bank of America for
      15   numerous loans since that time. 
      16              Nonprofit Housing Association has not taken a
      17   position for or against the merger, but I am here today
      18   to emphasize NPH's concerns regarding the proposed
      19   merger and its effect on our constituents. 
      20              First I want to describe the active and
      21   strong network of Nonprofit Housing Organization which
      22   exists here.  NPH last conducted a poll of nonprofit
      23   housing production in 1995-'96.  In the nine Bay Area
      24   counties we found that non-profits had produced over
      25   15,000 units of houseing in the prior six years at a
      26   development cost exceeding $1 billion.  In one year


       1   alone, 1994, nonprofit housing production accounted for
       2   61 percent of all multi-family housing built in the
       3   region.  Eighty-six percent of this housing serves
       4   low-income households and over 50 percent is targeted to
       5   very low-income households. 
       6              Unlike for-profit housing, this housing
       7   promises to remain affordable for the long term. 
       8              Our active nonprofit community has been
       9   involved for many years in helping to shape the programs
      10   that are offered by the Bank of America Community
      11   Development Bank.  This bank, based in California, has
      12   understood the unique needs of the housing market which
      13   has the dubious distinction of being the least
      14   affordable in the nation, according to a recent study by
      15   the Center for Budget and Policy Priority.  
      16              We have benefited by this California presence
      17   and have counted Bank of America as an important partner
      18   in addressing local needs and in building local
      19   capacity.  For example, the Bank of America Challenge
      20   has encouraged talented graduate students to study
      21   affording housing development and compete with their
      22   peers by developing affordable housing proposals.  This
      23   Challenge competition has generated competent staff for
      24   many nonprofit agencies, thus helping to build capacity. 
      25   We would like to see this and other innovative community
      26   development programs continued.  


       1              NPH is concerned that NationsBank will extend
       2   the use of their own for-profit CDC to California and
       3   with thereby compete for scarce resources and
       4   inadvertently undermine local organizations. 
       5              In addition, the BankAmerica Foundation has
       6   been an important source of support for our industry. 
       7   If this foundation is integrated into the central
       8   corporate in North Carolina, our access to these funds
       9   will almost certainly diminish.  We would like to see a
      10   written commitment to contribute a percentage of the
      11   bank's earnings to charitable contributions in Northern
      12   California. 
      13              Since most of NPH's members are engaged in
      14   producing multi-family housing, we expected to see an
      15   increased CRA commitment to multi-family housing as a
      16   result of this merger.  We note with disappointment that
      17   the bank's proposal is not targeted in regards to
      18   serving low-income families, nonprofit developers or in
      19   regards to offering a flexible mix of financing,
      20   including construction, term, bridge, bond programs and
      21   tax credit investments.  All these goals need to be
      22   specific and in writing. 
      23              The business relationships of our members
      24   with Bank of America have developed over many years.  We
      25   don't want this local presence, nor do we want a huge
      26   new bank replacing local staff in making decisions from


       1   North Carolina or reinventing the wheel when it comes to
       2   community lending.  Our members have benefited from the
       3   lively spirit of competition in community lending which
       4   has result in lower cost for loans and more flexible
       5   terms.  The merger which is proposed will in the long
       6   run curtail competition and roll back the gains we have
       7   made, therefore, we urge you to consider these issues
       8   completely.  Thank you.  
       9              MS. SMITH:  Thank you very much.  Questions
      10   or comments.  
      11              MR. FRIERSON:  Mr. Blasdell, you indiated you
      12   are a little unclear on the process.  Let me give you a
      13   somewhat two-minute summary of we're doing. 
      14              The Board of Governors has an application
      15   before it for NationsBank to acqauire Bank of America. 
      16   The board is seeking the comments of the public, both in
      17   written form and also the comments in this two days of
      18   public meetings we've had in San Francisco.  
      19              All of these comments will be made are part
      20   of the record.  They will be reviewed by the board, and
      21   they will be viewed in light of the statutory factors
      22   that the board is required to consider under the Bank
      23   Holding Company Act. 
      24              The focus of a lot of the comments we've
      25   received, both written and today and yesterday in public
      26   meetings, deal with what we call the convenience in


       1   needs.  The board is required to consider the effect of
       2   the proposal on the convenience and needs of the
       3   communities to be served.  And the information that we
       4   receive will be made a part of the record and will be
       5   carefully reviewed and taken into account when the board
       6   makes its final decision.
       7              MS. SMITH:  If we don't have any other -- any
       8   questions, then we thank you very much for coming this
       9   afternoon, and we'll move on to the next panel. 
Last update: December 3, 2010