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Public Meeting Transcripts

Public Meeting Regarding NationsBank and BankAmerica

Friday, July 10, 1998

Transcript of Panel Thirty-One


       1              MR. BAIRD:  Thank you very much for the
       2   opportunity to appear before you today.  I'm Jim Baird. 
       3   I'm the Executive Director of an organization known as
       4   Bay Area Development Company.  We're a nonprofit economic
       5   development corporation that operates in the nine San
       6   Francisco Bay Area counties as an SBA-504 certified
       7   development company.  
       8              Since 1981, we've done financings for small
       9   companies with over five different banks in the
      10   nine-county San Francisco Bay Area.  We've provided over
      11   a half a billion dollars in expansion capital to these
      12   companies resulting in the creation of over 7,000 small
      13   business jobs.
      14              I'm also past president and current director
      15   of an organization known as NADCO, the National
      16   Association of Development Companies.  NADCO is the
      17   national trade association for the country's 300 SBA-504
      18   lenders.  The 504 program is one of the most effective
      19   and cost-efficient economic development financing
      20   programs in the country today.       
      21              Since 1981, the 504 program has financed over
      22   $300 billion of small business expansion resulting in the
      23   creation of over 500,000 full-time private sector jobs.
      24              I'd like to provide several observations
      25   regarding economic development and small business
      26   financing in my testimony today.  


       1              First I'd like to indicate that, just like
       2   their conventional lending counterparts, economic
       3   development financiers and financing programs are subject
       4   to the ebbs and flows of both the business cycle and the
       5   credit or lending cycles in the economy.
       6              Today the economy is in good shape.  Interest
       7   rates are low and lending appetites for small business
       8   loans are very competitive and in fact at unprecedented
       9   levels.  But things change.  Just last week I read in our
      10   local newspaper of the Fed warning that, quote, "The
      11   nation's banks are not being careful enough about the
      12   commercial loans they make, and an economic downturn
      13   could seriously harm the industry."
      14              I urge the board to remember that lenders are
      15   generally herd creatures.  It is essential to our economy
      16   to retain the type of lenders who provide community
      17   development lending leadership and who will stand against
      18   the tide of regular lending and the herd creatures when
      19   times are not as good.
      20              Bank of America Community Development Bank has
      21   been the epitome of this type of lender.  Using the
      22   SBA-504 program as an example, the Bank of America
      23   Community Development Bank was there when others weren't.
      24              As a long-term participant in economic
      25   development, the recession of the early 90s displayed
      26   several trends that exposed quite a few things with SBA


       1   and small business lending.
       2              First of all, most of the lenders, both large
       3   and small, just flooded away from the small business and
       4   commercial real estate market in droves.
       5              Secondly, to hedge their risk, many of the
       6   small lenders turned to the Small Business Administration
       7   that utilized the SBA's 7-A guarantee program in large
       8   part because of its very high lender profits.
       9              Many of these banks that participated in the
      10   7-A lending program wouldn't even disclose to their
      11   borrowers or clients the existence of the SBA-504
      12   program.
      13              Although other lenders around the country,
      14   some other lenders continue to participate in the SBA-504
      15   program, Bank of America Community Development Bank led
      16   the charge, and, because of their participation
      17   nationally, we were able to establish the 504 program as
      18   a mainstream economic development tool.
      19              In looking at the numbers of BofA Community
      20   Development Bank's participation from '92 through '97,
      21   what you see is a 900 percent pace of growth overall.
      22              At this point in SBA's Region 9, which is
      23   California, Arizona, Nevada and Hawaii, the four-state
      24   area, Bank of America Community Development Bank provides
      25   17 percent of all SBA-504 financing.
      26              I agree with the recent NationsBank press


       1   release which indicates that the bank will, quote,
       2   "Continue to operate Bank of America Community
       3   Development Bank once the merger is complete."  I believe
       4   this should be made a condition of the merger, as well
       5   the location and the headquarters of Bank of America
       6   Community Development Bank should be required to be in
       7   California.
       8              In my opinion, the 504 program has experienced
       9   a level of commitment and leadership from Bank of America
      10   Community Development Bank that cannot be expected from
      11   any other bank in the country.  
      12              As a realist, I believe that regulatory
      13   activity cannot require this level of leadership, but I
      14   believe that it should do its best to try to encourage
      15   it.
      16              Thank you.  
      17              MS. SMITH:  Thank you.  Dr. Hall.
      18              DR. HALL:  Thank you.  Good afternoon, and I
      19   am, too, very pleased to have an opportunity to have a
      20   few words.
      21              I'm Doris Hall from Baltimore, Maryland.  A
      22   member of the Board of Directors of the Public/Private
      23   Corporation founded to manage Baltimore's empowerment
      24   zone initiative.               
      25              In this capacity, one of my concerns is job
      26   development, job creation and job retention in the areas


       1   of Baltimore City where there are no jobs, poor and no
       2   housing and sometimes no hope.
       3              As a part of this empowerment zone strategy,
       4   six village centers were created, one of which is
       5   Poppleton.  Downtown Baltimore, next to the University of
       6   Maryland, behind our new football and baseball stadium
       7   and close to Harbor Place.
       8              The Poppleton neighborhood then created its
       9   community development corporation to develop and help and 
      10   re-engineer its community.  It's made up of residents,
      11   both tenants and homeowners as well as public housing
      12   residents, business owners and faith based institutions.  
      13              I am here as Chairperson of that community
      14   development corporation to speak about the support,
      15   technical assistance and dollars received from
      16   NationsBank and NationsBank CDC as we redevelop our
      17   entire neighborhood.  The highrise public housing area in
      18   this neighborhood was imploded and in its place for-sale
      19   and for-rent townhouses will be built with six dollars.
      20              Poppleton Community Development Corporation,
      21   NationsBank, CDC and the Housing Authority of Baltimore
      22   City have formed a limited liability corporation to build
      23   the Pairin J. Mitchell [phonetic] Business Center, which
      24   will provide jobs and retail parcels on the site of
      25   redevelopment.
      26              NationsBank CDC has a $500,000 equity


       1   investment in this project.  It represents 40 percent
       2   ownership of our LLC, the Housing Authority is 55 percent
       3   and our Village Center CDC five percent.
       4              The 40 percent ownership of NationsBank CDC
       5   becomes a community share at the end of our five-year
       6   process and we become 45 percent owners of the business
       7   center, able then to participate and make decisions in
       8   the business center and its job creation, job retention
       9   strategy.
      10              There is also a $4 million loan from
      11   NationsBank provided on this seven-and-a-half million
      12   dollar project.
      13              Now, this 66-square-foot space office space
      14   was difficult to lease.  It's in a market area of 73,000
      15   persons, but it was impossible to get anyone to be
      16   interested in it because of the negative image that the
      17   neighborhood has.
      18              The community was losing its determination to
      19   do this, its enthusiasm and the belief that it could even
      20   occur, when NationsBank CDC stepped in as our partner,
      21   helped us find tenants, tutored us on mortgage loan
      22   financing, construction financing and the team led by one
      23   of NationsBank's CDC people, Maria Johnson, really pushed
      24   until we found a major drug store that is coming into an
      25   area that has absolutely no store at all.
      26              And, because of that, we are now 90 percent


       1   leased prior to the beginning of our construction, and
       2   NationsBank CDC remains the managing partner of our LLC
       3   by election.
       4              So I think that demonstrates the commitment
       5   that they've made to us and our trust in the way they do
       6   that.
       7              But in a neighborhood where the last of our
       8   three banks has moved out, indicated no interest in
       9   providing serves in spite our interest in community need,
      10   having a supportive banking partner is a welcome change.
      11              I believe, as do other members of my community
      12   development organization, that NationsBank, about whom we
      13   were very nervous when they bought out our Maryland
      14   National Bank, has provided access and services to our
      15   city's neighborhoods as the other merging banks have
      16   decided to move out of Baltimore City to other more
      17   affluent areas and closed their city locations 
      18              So we are very much in support of NationsBank
      19   as it begins to make this merger with BankAmerica.  We
      20   think it brings more resources to a bank that has served
      21   the neighborhoods well, especially those poor
      22   neighborhoods where there has been no support in the
      23   past.
      24              Thank you for your time.  
      25              MS. SMITH:  Any questions?  Thank you very
      26   much for coming this afternoon.


       1              We're waiting for the next witnesses to
       2   arrive.  One of them is coming in from the airport and
       3   the second one is someone who was scheduled to appear at
       4   5:50 and we haven't been able to get hold of her to let
       5   her know that we have been running ahead of schedule.  
       6              So we're going to take a break until at least
       7   one of them shows up and maybe until both of them show
       8   up.             MS. YOUNG.  Madam Chairman, are you still
       9   going to have open mike thereafter?  
      10              MS. SMITH:  What we have been doing is working
      11   people into the schedule that we know were going to show
      12   up for open mike, or, not that we know, but who have
      13   expressed interested.  
      14              If there is anybody here in the audience that
      15   is here for open mike, then we're ready.
      16              Are you one of them?  
      17              MS. YOUNG:  No.  
      18              MS. SMITH:  We're ready to hear from
      19   Ms. Johnson and are very appreciative of the fact she
      20   came early.  Ms. Johnson.
Last update: December 3, 2010