Public Meeting Regarding NationsBank and BankAmerica - Panel 3
Thursday, July 9, 1998
Transcript of Panel Three
94
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
.
95
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
.
96
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.)
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
. 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
.
98
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
.
99
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
.
100
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
.
101
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
.
102
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
.
103
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
.
104
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
.
105
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
.
106
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
.
107
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
.
108
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
.
109
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.
.
110
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
.
111
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
.
112
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
.
113
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.)