Public Meeting Regarding NationsBank and BankAmerica
Friday, July 10, 1998
Transcript
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4 PUBLIC MEETING
5 NATIONSBANK/BANKAMERICA PROPOSED MERGER
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11 SAN FRANCISCO, CALIFORNIA
12 FRIDAY, JULY 10, 1998
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1 JULY 10, 1998 8:37 A.M.
2 P R O C E E D I N G S
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4 MS. SMITH: Good morning. Let me start by
5 welcoming you to the second day of this important public
6 meeting on the application of NationsBank Corporation to
7 acquire BankAmerica Corporation.
8 I'm Dolores Smith the Director of Division of
9 Consumer and Community Affairs of the Federal Reserve
10 Board in Washington D.C. I'm the presiding officer for
11 this public meeting.
12 Our other panelists are: To my left, bob
13 Freirson, who is Associate Secretary of the Board, and
14 to my right, Ken Binning, who is Director for
15 Applications and Financial Analysis, Division of Banking
16 Supervision from the Federal Reserve Bank of San
17 Francisco; and to his right Trish Nunnley, Assistant
18 Counsel from the Federal Reserve Bank of Richmond.
19 We are here today because NationsBank
20 Corporation of Charlotte, North Carolina, has applied
21 for approval to acquire BankAmerica Corporation in San
22 Francisco, California.
23 When the Federal Reserve system considers one
24 of these applications, we look at a number of factors
25 under the Bank Holding Company Act, these include
26 financial issues, managerial issues, competitive issues
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1 and the convenience and needs of the communities
2 affected. In doing so, we particularly look at the
3 record of performance of the parties under the Community
4 Reinvestment Act.
5 The Community Reinvestment Act requires the
6 board to take into account an institution's record of
7 meeting the credit needs of its entire community.
8 The NationsBank application also involves the
9 proposed acquisition or retention of non-banking
10 companies engaged in activities permissible for bank
11 holding companies.
12 The board must determine whether the proposed
13 non-banking activities can reasonably be expected to
14 produce benefits to the public that outweigh possible
15 adverse effects such as undue concentration of
16 resources, decreased or unfair competition, conflicts of
17 interest or unsound banking practices.
18 The purpose of the public meeting is to
19 receive information regarding these factors. We will be
20 seeking to elicit this information and to clarify
21 factual issues related to the application.
22 We are very pleased that so many have been
23 willing to come and testify at this public meeting. We
24 will have altogether about 200 groups and individuals
25 represented during the two-day session.
26 I'll make a few remarks about the procedures.
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1 This is what is called an informal public meeting.
2 Members of the panel may ask those who are testifying
3 about their testimony. This is not a formal
4 administrative hearing, so we are not bound by the rules
5 regarding evidence, cross-examination and some of the
6 formal trappings of that kind of proceeding.
7 As you can see from the agenda, we do need to
8 stick to the schedule very carefully so that everyone
9 who has asked to offer oral testimony will have a chance
10 to say what they would like to say.
11 We are going to ask the witnesses today to be
12 mindful of the needs of others and to help us stay on
13 schedule.
14 The panels will be expected to stay within
15 their allotted times. We have a signal system with
16 regard to timing. We have two timekeepers, Ariel
17 Andress and Jessica Abehr. They will give a signal when
18 the witness has two minutes left to speak and another
19 signal when the time is up.
20 Occasionally the timekeeper may be unable to
21 get someone's attention when the time has expired. At
22 that point -- I forgot. There are actually two signals.
23 There is one given when there is one minute remaining,
24 so she will hold up a card. And then, when the time has
25 expired, she will hold up another card initially, but
26 when she is unable to give someone's attention, shell
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1 give a gentle, musical nudge (indicating). Something
2 like that.
3 There also have been some individuals who are
4 unable to sign up in advance, and, to the extent
5 possible, we are going to give them a chance to speak as
6 well. That will take place at the end of the meeting
7 this afternoon when we will make the mike available to
8 anyone who would want to make a presentation, time
9 permitting.
10 Witnesses may submit a written supplement to
11 their oral testimony by next Friday, July 17th, and then
12 the record will be closed.
13 Any written supplements should be directed to
14 Jennifer J. Johnson, Secretary of the Board, Board of
15 Governors of the Federal Reserve system Washington D.C.,
16 20551.
17 This is information that has been provided to
18 the witnesses already, and, if someone needs to have it
19 in writing, it can be obtained from the registration
20 desk.
21 These written supplements must be received by
22 5:00 p.m. Eastern Daylight Time next Friday. They can
23 be faxed to area code 202 452-3462.
24 The July 17 date applies only to these
25 supplements to oral testimony. The general public
26 comment period closed yesterday.
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1 Also, for witnesses, if you haven't turned in
2 copies of your written testimony, or, if you have any
3 other written statements to put into the record, please
4 leave them with the Federal Reserve staff at the
5 registration table. It's important that we get this
6 information for the record.
7 A transcript of the meeting will be available
8 by July 14th through the Federal Reserve Bank of San
9 Francisco and the board.
10 In addition, the official transcript will be
11 available by close of business on July 15th on the
12 board's public web site, which is www.bog.frb.fed.u.s.
13 Technology willing, it might be ready on July the 14th.
14 With that, we will begin with our first panel.
15 This morning we have -- if I can find it --
16 the Honorable Rosemary Corbin, Mayor of the City of
17 Richmond, who is representing the West County Mayors and
18 Supervisors Association, and then we also will have
19 Michelle Fadelli, standing in for the Honorable Mary
20 King, Supervisor for Alameda County.
21 I think we were scheduled to start with
22 Ms. Fadelli.
23 MS. FADELLI: Good morning. My name is
24 Michelle Fadelli, and I'm the Manager of Communications
25 and Governmental Affairs for the Association of Bay Area
26 Governments, and I'm speaking today on behalf of
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1 Supervisor Mary King from Alameda County who regrets she
2 was not able to join you this morning.
3 Mary and I both would be representing the
4 Association of Bay Area Governments, which is an
5 affiliation of the nine counties and 97 cities in the
6 San Francisco Bay Area. I'll be just reading from a
7 letter that we submitted on June 16th, which is a
8 summary of comments that we heard at a much smaller
9 regional hearing that we held last month.
10 Number one, job losses. We are concerned
11 about the large number of jobs being eliminated and
12 particularly concerned about the number that will be
13 eliminated, not just in San Francisco but throughout the
14 Bay Area. We ask that employees receive reasonable
15 notice of any layoffs and that the new bank make a
16 commitment to job training and placement.
17 Number two, community development. We are
18 concerned about the recent community development
19 commitment that fails to provide specifics about
20 distribution throughout various states, regions and
21 communities; in addition, reference to small business
22 fails to provide specific commitments to minorities and
23 low-income and populations.
24 We are concerned about the preservation of B
25 of A's Community Development Bank and ask that the new
26 bank not compete with nonprofit housing developers in
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1 the Bay Area.
2 Number three, consumer protection. We are
3 concerned about branch closures, fee increases, ATM
4 availability and ATM fees and honoring commitments to
5 current customers.
6 If the new bank plans to save over a billion
7 dollars by 1999, we can only suspect that it is the
8 customers will feel the impact. The merger announcement
9 boasted that the new bank will have $570 billion in
10 assets. We ask how with this giant maintain hits
11 connection to the hometown customers.
12 Number four, fairness to minority and
13 low-income populations. It is stated that the
14 NationsBank has a reputation for generic lending, and
15 California is not a generic state. As an aside, our
16 association has forecast significant changes in regional
17 demographics. The Asian population will grow from 16
18 percent of the population in 1990 to 20 percent in the
19 year 2020.
20 The Hispanic population will grow from 14
21 percent to 24 percent by 2020 and the Caucasian
22 population will no longer be a majority at 47 percent.
23 We are concerned that NationsBank is not prepared to
24 deal with the diversity in California and especially the
25 Bay Area.
26 We are concerned with reports that
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1 NationsBank has a very poor record of lending to
2 minorities and low-income populations, lending only a
3 reported 6.3 percent to low-income households and even
4 lower percentages to minorities.
5 The new bank must not be dragged down by the
6 poor standards established by NationsBank. Similar
7 performance with minority and low-income lending will
8 not pass muster in the Bay Area.
9 We are concerned about the closure of San
10 Francisco BofA headquarters and the transfer of
11 decision-making to Charlotte. North Carolina is a long
12 way from California in miles and light years away, we
13 believe, in attitude.
14 Our concerns are not relieved by word that
15 global operations will be based in San Francisco. Such
16 operations will be looking west to the Pacific Rim and
17 will not be concerned about jobs and customer relations
18 in the rest of the Bay Area.
19 More generally, we are concerned about the
20 reduction of competition in this merger as well as other
21 proposed mergers in banking. With fewer banks, who will
22 be compelled to offer free checking, free ATMs, and true
23 customer service?
24 Mergers don't tend to favor consumers and
25 don't tend to favor small businesses. BofA customers
26 are our constituents and we voice our concerns on their
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1 behalf.
2 And this letter was signed by Mary King, the
3 ABAG, and Alameda County Supervisor.
4 MS. SMITH: Thank you. Ms. Corbin.
5 MS. CORBIN: Yes, thank you. I am here
6 representing West Contra Costa County. I am Rosemary
7 Corbin, the Mayor of Richmond. I want to thank you for
8 allowing me to testify this morning.
9 Located on the east shore of San Francisco
10 and San Pablo Bays, West Contra Costa is comprised of
11 the cities of El Cerrito, Hercules, Pinole, Richmond and
12 San Pablo and the unincorporated areas of El Sobrante
13 Kensington, Rodeo and Crockett. West County has
14 approximately a population of 200,000. The City of
15 Richmond, with a population of 93,000, is the largest,
16 oldest and most urbanized city in the area.
17 West County is a diverse community with
18 minority population of over 52 percent. While it
19 contains approximately 22 percent of the county
20 population, over 40 percent of the county's AFDC
21 recipients reside in West County and has many of the
22 largest low and moderate income neighborhoods in the
23 county.
24 However, it has some of the oldest
25 communities where the banks that are now moving to the
26 suburbs got their start.
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1 West County is a community where a majority
2 of its population live and work in the area or in
3 communities very close by. The West County Mayors and
4 the city staffs meet on a regular basis and act
5 collaboratively on issues such as transportation, waste
6 disposal, public safety and economic issues such as the
7 subject of this hearing.
8 Our West County chambers of commerce, cities
9 and institutional institutions and nonprofit
10 organizations collaborate through a variety of
11 organizations.
12 Finally, we are an effective lending
13 territory as described by the Federal Reserve Bank of
14 San Francisco and believe that the Bank of America and
15 NationsBank, should this merger go forward, have an
16 obligation to develop a plan with West County business
17 government and community leaders for addressing the
18 community reinvestment needs in our area.
19 Bank of America has nine branches in West
20 County and, with over $425 million in business and
21 household deposits, is the second largest bank in our
22 community.
23 In terms of banking services, while BofA has
24 not closed any branches in West County, it has downsized
25 and relocated, which had been freestanding bank
26 branches, to cramped in-store branches, particularly in
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1 low-income areas such as Richmond's Iron Triangle
2 neighborhood.
3 While we applaud BofA's innovative
4 initiatives in reinvestment lending, they appear to have
5 had little visible impact in West County. One bright
6 spot was a $625,000 loan and assistance with welfare-
7 to-work-planning to Rubicon programs, a job and housing
8 development nonprofit agency serving special needs
9 populations.
10 Should this merger go through, we want to see
11 the continuation and strengthening of the BofA's
12 Community Development Bank, and we are requesting that
13 BofA begin a process of assisting West County for
14 developing a plan for meeting our community reinvestment
15 needs.
16 I often describe West County as being in a
17 money shadow. You probably know what a rain shadow is.
18 Well, when money floats down from the federal
19 government, we tend to be behind this rain shadow where
20 the money goes to Oakland and San Francisco, and we
21 think that community, as defined under the Community
22 Reinvestment Act, should include the whole community.
23 West County's specific needs in terms of
24 community economic development are:
25 Financing for commercial rehabilitation and
26 facade improvements in conjunction with redevelopment
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1 and other public financing in the older retail and
2 commercial areas of Richmond, El Cerrito, Pinole, San
3 Pablo, Rodeo and Crockett;
4 better access to financing for young small
5 businesses, particularly minority and women-owned
6 businesses through collaboration with business
7 development organizations such as the West County
8 Business Development Center and the local chambers of
9 commerce;
10 financing for various major development
11 projects in West County, including the Richmond Transit
12 Village, Ford Assembly Building rehabilitation, Point
13 Molate reuse and the business incubator for bioscience
14 business;
15 In terms of housing, we need new affordable
16 development such as Richmond Transit Village, a 52-unit
17 senior housing project, Cortez and Woods school sites
18 and Pinole commercial properties owned by a subsidiary
19 of BofA which the city would like to develop for senior
20 housing;
21 In-fill new construction and rehabilitation
22 throughout older developed neighborhoods throughout West
23 County.
24 Vacant closed branches for a are a problem
25 for all of us. The bank needs to work with cities and
26 economic organizations to develop commercially viable
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1 reuse programs for branch facilities at closes such as
2 the Richmond Ninth street branch.
3 And, finally, we have a relatively high
4 unemployment rate. The bank needs to mitigate the loss
5 of jobs from this merger and commit to the hiring and
6 promotion of women and minorities.
7 In summary, West Contra Costa is concerned
8 about how you define community and how you can ensure
9 that all of the bank's community will be served. We do
10 not believe that the proposed CRA plan contains enough
11 specific goals or the monitoring necessary to enforce
12 them.
13 We need area-specific community reinvestment
14 plans with community input. Also, the potential loss of
15 CRA leaders within the Bank of America causes us to
16 worry about commitment.
17 We applaud BofA's history of innovation
18 regarding community reinvestment and its ability to work
19 with all segments of the community, including nonprofit
20 organizations.
21 We are looking to the Federal Reserve Bank to
22 ensure the continuance of a commitment to the innovation
23 from the merged bank and that commitment will extend to
24 all parts of the community.
25 Thank you.
26 MS. SMITH: Any questions of Ms. Corbin?
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1 MR. FRIERSON: Mayor Corbin, could I ask you
2 a question, please?
3 MS. CORBIN: Yes.
4 MR. FRIERSON: You mentioned that one of the
5 things you were advocating was the continuation of the
6 strengthening of the Bank of America Community
7 Redevelopment Bank, and we've heard quite a lot about
8 that organization yesterday, and I expect we'll hear
9 more today.
10 Could you elaborate a little bit on your
11 relationship with the bank and it's projects or any
12 types of developments they have done in the City of
13 Richmond?
14 MS. CORBIN: That's what I referred to in
15 terms of the money shadow we are in. The Bank of
16 America has funded the Rubicon program, which we are
17 very grateful for, but we think that in defining
18 community, too often Oakland is seen as taking care of
19 the whole -- the Oakland area is seen as taking care of
20 the whole of the East Bay, and we're saying that
21 community has to include West Contra Costa County as
22 well.
23 I used to live in San Francisco, and I was a
24 librarian at San Francisco Public and used to get in
25 arguments about the fact that Richmond is not in Alameda
26 County and it's not a suburb of Oakland.
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1 I think too often people don't understand
2 what we are. They should come. I'll give him a tour
3 and they can see that it's a lot -- the East Bay is a
4 large area and we're probably -- this is probably just
5 one example of others throughout the Bay Area where, if
6 you sit in an office in San Francisco or, God help us,
7 in North Carolina, and you think that because you are
8 doing something in Oakland you are doing it for the
9 whole East Bay, you are wrong, and we're very concerned
10 about that because we have suffered from that.
11 I don't want to take anything away from
12 Oakland. I just want to be sure we get our fair share.
13 Any other questions?
14 MS. SMITH: Thank you.
15 MS. CORBIN: Thank you.
16 MS. SMITH: Thank you very much.
17 We are ready for Panel 18.
18 (Pause in proceedings.)
19 MS. SMITH: We'll start with Mr. Hewett.
20 MR. HEWETT: Thank you. My name is Conrad W.
21 Hewett. For over the last three years I served as the
22 State Superintendent of Banks and Commissioner of
23 Financial Institutions for the State of California. My
24 term ended this past June 30th.
25 My prior to my position for the State of
26 California, I was a managing partner at Ernst & Young.
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1 For over 33 years I specialized in financial
2 institutions. Consequently, I have been involved in
3 many mergers and acquisitions of financial institutions.
4 During my past three years in my capacity as
5 State Superintendent of Banks and Commissioner, I have
6 approved a number of bank mergers and acquisitions. The
7 largest acquisition was Wells Fargo Bank acquiring first
8 Interstate Bank.
9 The California laws concerning the sale,
10 merger and conversion of depository corporation are very
11 similar to the federal agency laws such as the Federal
12 Reserve Bank.
13 As a regulator, I had several standards to
14 consider under California banking law before I could
15 approve or deny such a transaction. Some of the
16 elements of the law included:
17 One, the transaction would not result in a
18 monopoly;
19 two, competition would be not lessened or be
20 anti-competitive;
21 three, the convenience and needs of the
22 community will be served;
23 fourth, the shareholders equity will be
24 adequate, and the financial condition of the combined
25 banks will be satisfactory;
26 fifth, directors and executive officers will
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1 be satisfactory;
2 and, last, the surviving entity will afford
3 reasonable promise of successful operation and operate
4 in a safe and sound manner.
5 In my opinion, this proposed merger meets all
6 the standards to be considered under the Bank Holding
7 Company Act.
8 I note that the proposed transaction does not
9 result in the largest bank in the United States. Also,
10 this merger will operate in only 25 of our 50 states.
11 I publicly stated over three years ago that
12 there would be a large consolidation in the banking
13 industry. I had many reasons for this statement and I
14 believe that this trend will continue.
15 There is too much capacity in the banking
16 industry, too many banks and too much competition from
17 outside the banking industry, thus, the need to
18 consolidate.
19 Even our largest United States banks face
20 tremendous competition from companies such as Merrill
21 Lynch, GE Capital, General Motor Acceptance
22 Corporations, all of the mutual funds, such as Fidelity
23 and T. Rowe Price and the many consumer finance
24 companies such as Household Finance and now the
25 internet. Many of these companies are not subject to
26 the same state and federal regulatory laws such as the
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1 bank's presently are.
2 Other reasons I see for this merger are:
3 First, the high cost of investment in
4 technology helps drive these mergers and consolidations.
5 The non-bank competitors have invested heavily in
6 technology and banks must invest as heavily, if not
7 more, in order to compete and to survive. This
8 investment requires a very large capital base, and one
9 way to create this base is through consolidation;
10 secondly, our largest U.S. banks are still
11 small compared to the other banks in the world which
12 comprise mainly of the Japanese, German and French
13 banks.
14 as you know, the U.S. is rapidly becoming a
15 globally player and world trader. Our banks must be
16 large enough to provide the financing and capital
17 necessary for our businesses to compete worldwide;
18 third, because there is very little overlap
19 in this merger concerning the consumer, the consumer
20 need and convenience should be satisfied. Branch
21 banking has changed dramatically in the past five years
22 because of ATM usage, banking by phone, computer banking
23 and banking by mail. The consumer has dictated this
24 shift in the delivery system of banks. The consumer has
25 a wide choice in availability of financial institutions
26 from which to choose. As I said earlier, the
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1 competition is fierce. This transaction should enhance
2 the service and products available to the customers of
3 the new bank. This is truly an interstate bank merger
4 as contemplated by the federal Riegle-Neal Interstate
5 Banking and Branching and Efficiency Act of 1994, which
6 congress passed, and the law became effective September
7 29th, 1994. As I see, as a result, the consumer will be
8 the benefactor of one of the first truly interstate
9 banks in our country.
10 Concerning the other facts of this merger,
11 both companies are financially strong as indicated by
12 their financial statements, capital ratios, operating
13 ratios and market capitalization.
14 If this transaction is approved by the
15 Federal Reserve Board, in my opinion it should be, then
16 a nationwide franchise will be delivered which has the
17 potential to deliver financial service to millions upon
18 millions of families and businesses.
19 Thank you.
20 MS. SMITH: Thank you. Mr. Collette.
21 MR. COLLETTE: Is it on?
22 MS. SMITH: Yes, if you just bring it a
23 little closer.
24 MR. COLLETTE: Thank you. I appreciate the
25 opportunity of expressing -- addressing this very
26 important topic before the Federal Reserve.
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1 My name is Craig Collette. I am a member of
2 the Board of Directors of the California Independent
3 Bankers and president of a small bank in Southern
4 California called Marathon National Bank, it's a $75
5 million institution.
6 As an independent banker with 33 years of
7 experience, I would like to give you my views on the
8 impact of this gigantic merger between NationsBank and
9 Bank of America. I am speaking this morning also on
10 behalf the California Independent Bankers, which
11 represents some 200 banks throughout our state.
12 Let me first address you, though, as a
13 concerned citizen of the State of California. When
14 legislation was debated in Sacramento three years ago,
15 this legislation enabled this kind of merger, and the
16 California Independent Bankers raised an important
17 issue: What will the tax impact be when we permit out-
18 of-state institutions to own California banks and their
19 headquarters are moved out of state? Little attention
20 was given to this critical question. As a concerned
21 taxpayer in the state, I would like to raise this issue
22 again.
23 I would recommend that those that are
24 reviewing this application for merger derive estimates
25 and projections of what this merger will mean to
26 California taxpayers when the headquarters of the
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1 combined institutions shift to Charlotte, North
2 Carolina.
3 Matter of fact, all of California's three
4 largest financial institutions are now or about to be
5 moved out of state or the headquarters moved out of
6 state from these entities.
7 Now, as an independent bank president, I have
8 additional views. The United States, with the passage
9 of the Riegle-Neal bill, is moving from a diversified
10 financial system to one characterized by a lopsided
11 barbell with just a very few large banks at one end and
12 a large number of independent banks at the other.
13 To quote Hugh McColl, Chief Executive of
14 NationsBank, U.S. banking will be quote "...a
15 barbell-shaped industry with a dozen or a half dozen
16 very large players at one end and four or five thousand
17 boutiques on the other," unquote. On this issue we
18 agree, but what are the implications of such a
19 structure? I feel strongly that increased financial
20 concentration means less competition.
21 NationsBank and Bank of America's merger at
22 60 billion is the largest between two American banks.
23 The bank created by this merger will have 8.2 percent of
24 the Nations deposits. Dangerously close to the ten
25 percent limit set by the Riegle-Neal bill.
26 Unfortunately, this trend towards
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1 mega-mergers will probably continue given the overvalued
2 asset base our own stock market has created. The trend
3 toward mega-mergers, this includes this merger, is not
4 healthy for Main Street, where I come from, is very
5 risky for Wall Street and it is bad for the Federal
6 Reserve and other regulators who will have the
7 responsibility to examine and possibly to even bail out
8 these mega-giants when they are mismanaged, over
9 speculate or reach too far in risky ventures. These
10 banks are the new super-sized, too-big-to-fail
11 varieties.
12 The evidence shows that increased the
13 concentration in the banking industry has not benefited
14 bank customers. The economies of scale that supposedly
15 justify large bank mergers either do not materialize or
16 are not passed on to the customers. In addition, large
17 interbank mergers reduce competition in ATM network
18 markets as well as credit card markets.
19 Consider five points:
20 First, larger banks charge higher fees.
21 According to Bank Rate Monitor, none of the top 50 banks
22 in the U.S. offer the least expensive checking accounts.
23 In fact, those offering the most expensive checking
24 accounts are banks involved in the latest mega mergers,
25 Citibank and NationsBank. The best deals are offered by
26 smaller regional and community banks. In a 1997 study
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1 found a widening gap between large and small bank fees;
2 the Federal Reserve study found the average
3 fees charged by multi-state banks are significantly
4 higher than those charged by single state banks, even
5 accounting for location and other factors that might
6 explain the differences;
7 two, banks mergers have an adverse effect on
8 consumer pricing. A Boston Federal Bank study of 499
9 bank mergers found the combined banks lowered interest
10 rates paid on deposits regardless of the amount of
11 competition in the market;
12 three, economies of scale. It is
13 interesting, the evidence suggests that the optimal size
14 of a bank in terms of economies of scale, profitability
15 and efficiency is between $100 and $1 billion, quite a
16 bit smaller than the 300 to 600 billion loss that will
17 be created from the latest mergers. A Harvard study
18 showed that instances of improved operating results
19 after a merger were due primarily to higher repricing,
20 not economies of scale, suggesting the use of increased
21 market power to raise prices. Given sufficient market
22 power, large banks can price smaller competitors out of
23 the market with below market rate loans or above market
24 rate deposits;
25 four, large interbank mergers also have
26 negative effects on competitive ATM network markets;
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1 and, five, large bank mergers are creating an
2 oligopoly of credit card issuers led by Citibank, Bank
3 One and NationsBank.
4 It is also indicated by the Rand Research
5 organization that when the pending mergers are
6 consummated the top ten credit card issuers will control
7 72 percent of the credit card market.
8 In conclusion, as an independent bank
9 president, I am fully aware that in the beginning
10 community banks will prosper from the fallout of
11 customers from big bank mergers. After these giants
12 consolidate, however, there will be no longer a fair and
13 equitable competitive environment in independent banks
14 in the areas that I have pointed out in my testimony.
15 Bank customers and small businesses will suffer as a
16 result.
17 Thank you very much.
18 MS. SMITH: Thank you. Kurmel.
19 MR. KURMEL: My name is Larry Kurmel. I am
20 Executive Director of the California Bankers
21 Association. I'll just make a few points. I've offered
22 some testimony on some things that you can have for the
23 records,
24 Much has been made over the increased
25 dominance of the banking marketplace resulting from BofA
26 and NationsBank merger. Our view to the contrary is the
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1 merger will do no more harm to the banking industry in
2 California, in fact, it will create market
3 opportunities. I base that on statements with
4 interviews with community bankers throughout this state
5 and the western United States. Obviously Craig Collette
6 was not among them.
7 But there is a very different view, as
8 evidence, there were ten new bank charters in California
9 in the last year. In Nevada, which concluded in 1997
10 with 21 community bank charters, now has 31 community
11 bank charters. I understand that's soon to be 32 or 33.
12 Frankly, there is more threat to the
13 community banking business by unrestrained tax-exempt
14 from credit unions than it will from the combined merger
15 of BankAmerica and NationsBank, which has very little
16 overlap in their marketplace, as you are all aware.
17 BankAmerica has long been a leader within the
18 ranks of the industry in California. And the California
19 Banks Association, in particular, a past Chairman or
20 president of our organization is Don Mulane, the current
21 President of the California Bankers Association is Vice
22 Chairman of the Bank of America, Kathy Burke.
23 The question we had is the commitment of
24 NationsBank to the continued leadership role
25 demonstrated by BankAmerica in California. And Hugh
26 McColl was a keynote speaker at our convention in May to
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1 personally provide that assurance and provide the
2 assurance of his commitment to assuring healthy
3 competition between large banks and community banks in
4 the State of California.
5 Much has been made about combining and what
6 happens with people and that sort of thing. I should
7 note the combined employee base of the two organizations
8 is about 200,000 people. That's larger than the City of
9 Fresno. Out of that they anticipate somewhere around
10 2,000 to 2,500 jobs will actually be lost. In relative
11 terms, according to any business study I've seen, that's
12 a relatively insignificant amount.
13 Let me talk a little bit, there is a lot of
14 speculation about what do the commitments of these banks
15 mean. Let me focus for a moment, if I may, just on the
16 $250 billion commitment. I don't know about you, but
17 that's a big number to me.
18 I started my career as a housing expert in
19 the Department of Housing and Community Development in
20 the State of California. I was a deputy secretary to
21 the Business Transportation Housing Agency in
22 California.
23 MS. SMITH: Would you move your mike a little
24 to the left?
25 MR. KURMEL: Sure. Better?
26 MS. SMITH: Yes.
441
1 MR. KURMEL: I am reluctant to move to the
2 left too much, but I appreciate it.
3 I was a deputy secretary to the Business
4 Housing Transportation Agency under then Governor Jerry
5 Brown and was part of the creation of the California
6 Housing Finance Agency.
7 Bank of America was one of the instrumental
8 entitles in providing a consortium of banks to provide
9 low and very low multi-family housing financing in the
10 State of California. The consortium today, which
11 includes, I believe, over 60 banks, mostly community
12 banks, has opportunities for investment in CRA
13 activities they would not have had on their own.
14 CCRC in California, in its ten years of
15 existence, has done more multi-family, low and very
16 low-income housing financing than has the California
17 Housing Finance Agency in its 20 years of operation.
18 So, when it comes to commitment, you have to look at the
19 record, it seems to me.
20 I testified in this very room about the
21 Security Pacific and BankAmerica merger. At that time a
22 ten-year commitment was made by the bank of the
23 surviving organization to CRA lending. They met that
24 requirement, met that threshold within three years and
25 went on to fully exceed that. Last year they started --
26 established I believe it was $140 billion target and
442
1 they were moving briskly towards fulfilling that public
2 obligation they had created for themselves, I might add.
3 I would add one note of caution. In my
4 experience in housing and economic development, I am
5 very cautious of throwing too much money at a problem.
6 For one reason, you don't want to throw out or denigrate
7 the experience or exercise of experience of other
8 players in that market.
9 For example, Mayor Corbin might note, that
10 the largest community bank in Richmond is the Mechanics
11 Bank of Richmond, an organization that had been there
12 for over 90 years who had a substantial commitment to
13 financing and improvement in that community.
14 You don't want BankAmerica/NationsBank
15 commitment to go in there and blow through the ability
16 of Mechanics Bank to participate in the restructuring
17 and rebuilding of its communities.
18 So, in my view, you have to be real careful
19 about being too specific with this large batch of
20 dollars for fear of disrupting those processes that are
21 already in place. But, if you are looking at the track
22 record of both NationsBank and BankAmerica as exercised
23 through people like Don Mulane who have chaired the
24 Community Bank of Bank of America, they have met every
25 public goal they have established for themselves and
26 exceeded that performance. The same has been true in
443
1 NationsBank in those market areas where it has been
2 performing.
3 So I would just urge some caution playing
4 with $350 billion dollars. You don't want to end up
5 tantamount to offering a drunk a bottle of Tokay. Thank
6 you.
7 MS. SMITH: Thank you. Mr. Koppe.
8 MR. KOPPE: Thank you, and good morning. My
9 name is Bruce Koppe. I am Executive Director of the
10 Washington Bankers Association, located in Seattle,
11 Washington.
12 The Washington Bankers Association represents
13 substantially all of the commercial banks in our state,
14 almost all of which fit the generally accepted
15 definition of community bank.
16 Prior to assuming my present position, I
17 spent over ten years as General Counsel to Rainier
18 National Bank in Seattle, later Security Pacific Bank
19 Washington. Where my duties included responsibility for
20 community affairs and social policy.
21 My time in Washington includes the period
22 covering Bank of America's acquisition of Sea First Bank
23 in which Bank of America had a significant interest and
24 the relatively recent conversion of Sea First into
25 branches of Bank of America.
26 During all of these periods and events, I
444
1 have had significant contact with the Sea First/Bank of
2 America Corporation in collaborative community affairs
3 projects, as a representative of both donor and donee
4 groups, as a competitor and in promotion of collective
5 efforts on behalf of the banking industry in our state
6 working with and through the bankers association.
7 My purpose today is to support the merger
8 application and record of Bank of America, particularly
9 its Sea First operation in the State of Washington.
10 Sea First has been and continues to be a
11 leader in the community especially in community
12 reinvestment.
13 I don't intend to recite specific
14 accomplishments because those are known to the Federal
15 Reserve through the Sea First/Bank of America CRA exams
16 which for several years have resulted in ratings of
17 outstanding. Rather, I want to emphasize what I believe
18 are important indicators of future conduct.
19 Much of the controversy surrounding mergers
20 of institutions involves an attempt to determine what
21 the future holds for the communities to be served. The
22 best indicators of that are how the institutions have
23 behaved in the past. And, in order to help determine
24 that, my presentation focuses on four specific points.
25 First, when bank of America acquired Sea
26 First Bank in the early 1980s, there was a great deal of
445
1 apprehension in Washington State the control of the
2 entity would shift to San Francisco and that Sea First
3 community involvement would suffer. That did not happen
4 much to the credit of both parent and subsidiary.
5 More recently, when Sea First's operations
6 were converted to branches of Bank of America, albeit
7 operating under the Sea First name, the same
8 apprehensions were expressed. In fact, the apprehension
9 began when the BofA Sea First organization began
10 functionalizing its operation sometime prior to
11 conversion to branches.
12 Again, those apprehensions have proved
13 groundless. In each case we have seen no diminution in
14 the Sea First commitment to all aspects of community
15 affairs and community service.
16 Moreover, I understand that the head of the
17 Bank of America presence in the State of Washington,
18 Mr. John Renlove has been given broad authority and
19 autonomy over community activities. Certainly that's
20 been borne out by the company's performance to date, a
21 continuation of its broad and significant involvement in
22 all aspects of community development, philanthropy and
23 service to its customers.
24 As Sea First/Bank of America has gone through
25 each of these transitions its past performance has
26 accurately predicted its future performance.
446
1 Second, banking customers are extremely
2 sensitive to mergers and acquisitions even among our
3 smaller community banks, but particularly with respect
4 to the large bank mergers. This has been demonstrated
5 most notably in the key bank acquisition of Puget Sound
6 Bank and Wells Fargo's acquisition of First Interstate
7 Bank in our state. Each acquisition has seen some
8 outpouring of customers to local community banks known
9 for excellence of personal service.
10 Sea First has a great reputation for customer
11 service as well as an aware management team. They know
12 as well as anyone that to dilute their community
13 activities and service at this time or any time in the
14 future would be the height of folly. As stated earlier,
15 their record through similar events has demonstrated not
16 only their awareness of that fact but their continued
17 commitment to their customers and their communities
18 generally.
19 Third, I think it's important to know at
20 least in our state that our community banks do not see
21 the merger of BofA and NationsBank as a threat. If
22 anything, it's an opportunity to gain customers. I'm
23 not saying anything that BofA isn't keenly aware of and
24 I don't think Sea First/BofA will let that challenge go
25 unanswered.
26 Finally, I've worked with Sea First on
447
1 community outreach including fairly extensive activity
2 over the past year, much of which was very innovative.
3 The organization has willingly committed its time and
4 resources and continues to do so. I can attest
5 personally to their commitment.
6 In summary, the Sea First/Bank of America
7 record of community support and customer service in the
8 State of Washington has been first rate and has not been
9 diminished through corporate change.
10 We believe their past performance totally
11 supports the presentation application. We also believe
12 that their past performance through periods of
13 significant corporate change is a reliable predictor of
14 what will happen in the future. In our view,
15 speculation and conclusions to the contrary are not only
16 totally unwarranted, but very unfair.
17 Thank you.
18 MS. SMITH: Thank you, questions.
19 MR. FRIERSON: I have two questions. First
20 for Mr. Hewett, as a former state banking supervisor and
21 decision-maker, I would be interested in your views on
22 the comments that we have heard at this public meeting
23 and in the comment period that a bank with a
24 headquarters on the east coast would be less successful
25 in understanding the credit needs of California
26 communities.
448
1 MR. HEWETT: That's a good question. I do
2 believe that California is such a tremendous economic
3 market, not only in the United States but in this world,
4 that if there is any void of consumer availability to do
5 banking of any kind, that the bank from the east coast
6 or from the southeast will come into this state and
7 establish a headquarters if that means that will help
8 that particular institution financially in the future
9 and so forth.
10 I don't see any -- in today's age of
11 technology, wherever it's headquartered, could be
12 headquartered in Hawaii and still operate in California
13 and still provide services to the consumer and still be
14 competitive. I don't see that as a real significant
15 issue in terms of where the headquarters -- the
16 headquarters are usually only made up of a few, in this
17 case probably only a few hundred people. It's not the
18 headquarters, it's the service that's provided to the
19 customer by the representative of that bank, wherever
20 that community may be.
21 MR. FRIERSON: And a question for
22 Mr. Collette. Does your bank operate an ATM network?
23 MR. COLLETTE: We don't have our own ATMs.
24 We utilize networks provided by larger institutions.
25 MR. FRIERSON. Could you give us your bank's
26 experience with the competitive impact of the
449
1 consolidation of ATM networks, specifically how it
2 affects your clients:
3 MR. COLLETTE: Yes. On a pricing basis, we
4 have had experience where we have been -- where our
5 customers have been charged for the use of another
6 institution's ATM, even though we were a member of the
7 network. And that did do some harm to the customer base
8 of our institution.
9 MR. FRIERSON: Thank you. I don't have any
10 more questions.
11 MS. SMITH: There are no other questions,
12 then we thank you very much for coming this morning.
13 (Pause in proceedings.)
14 MS. SMITH: We'll go ahead and start with
15 Ms. Supinski substituting for Mr. Lee.
16 MS. SUPINSKI: Yes, thank you.
17 Good morning, Ms. Smith and members of the
18 panel. This is the testimony of Matthew Lee, Executive
19 Director of Inner City Press Community on the Move and
20 of the Inner City Public Interest Law Center, together
21 known as ICP, which the California Reinvestment
22 Committee has been kind enough to present.
23 ICP on May 6th filed a 54-page protest to
24 this application along with the Black Citizen for
25 Justice Law and Order of Dallas, Texas and the New
26 Mexico Alliance, two of its whose members, Gilbert
450
1 Sanchez and Robert Wells, you heard from yesterday.
2 We are opposed to this proposed merger
3 primarily due to NationsBank's continued predatory and
4 discriminatory practices through its finance companies,
5 NationsCredit and EquiCredit, and due to the
6 anti-competitive and branch-closing effects the proposed
7 merger would have in New Mexico and in Dallas, Texas.
8 NationsBank's ill-defined community
9 reinvestment pledge does nothing to address these
10 issues. In fact, as explained in a moment,
11 NationsBank's failure to live up to its commitment with
12 regard to NationsCredit, calls into question whether the
13 board could rely on NationsBank's press release pledge.
14 In 1996, when NationsBank announced its
15 proposal to acquire Boatmen's Bank shares, including its
16 subsidiary Sunwest, the larger bank in New Mexico, ICP
17 and the New Mexico Alliance filed comments with the
18 Federal Reserve Board. We critiqued the lending of
19 NationsBank and its higher than normal interest rate
20 finance company, NationsCredit, and documented that
21 NationsBank was referring applicants who were
22 disproportionately African Americans and Hispanics from
23 its banks to NationsCredit which offers higher than
24 normal interest rate credit, but that NationsCredit had
25 no policy or program to refer up to NationsBank
26 applicants who were entitled to normal interest rate
451
1 credit.
2 We showed that NationsBank has been closing
3 branches in low-income communities of color and has been
4 opening NationsCredit offices in these communities.
5 The board has refused to conduct an
6 examination of NationsCredit but did ask NationsBank how
7 many lawsuits were pending against NationsCredit.
8 NationsBank submitted a skeletal list of 119 lawsuits
9 then pending against NationsCredit. We showed that the
10 list was incomplete, but, even if it were not, it would
11 seem that volume of litigation would trigger some
12 examination by the Federal Reserve.
13 During that protest, NationsBank CRA officer
14 was quoted in U.S. News and World Report to the effect
15 that NationsCredit would institute a practice referring
16 applicants who were entitled to normal interest rate
17 loans up to NationsBank banks from NationsCredit and
18 that this would be done by February of 1997.
19 NationsBank refused thereafter to provide
20 information about NationsCredit or this promise to
21 change. In January of this year, we were informed by
22 the Office of the Comptroller of the Currency that
23 NationsCredit still has not instituted any referral-up
24 program. NationsBank has since confirmed this,
25 proffering as its excuse that there has been a lot of
26 turnover at NationsCredit.
452
1 Most recently, the Federal Reserve itself
2 asked NationsBank to describe all current and planned
3 referral programs between its banks, mortgage company
4 and finance companies. NationsBank's response has been
5 that everything is in flux.
6 Simply put, NationsBank's 350 billion
7 community reinvestment commitment is not credible since
8 NationsBank has not lived up to its previous
9 commitments. It is also important to note that
10 NationsBank has refused to make any more specific
11 geographic commitments even at the state, much less the
12 county, level. But the key point to us is that
13 NationsBank promises of future improvements do not in
14 fact take place.
15 After NationsBank bought Boatmen's and
16 Sunwest, NationsBank quickly closed eight branches in
17 New Mexico, even though there was not overlap between
18 NationsBank and Sunwest.
19 The Federal Reserve has said in its
20 NationsBank/Boatmen's conditional approval order that it
21 would monitor NationsBank's branch closing, but this has
22 had little to no effect.
23 More recently, after gaining approval to
24 acquire Barnett Banks of Florida, NationsBank has moved
25 to close over 200 branches in Florida.
26 In this proposal NationsBank and Bank of
453
1 America overlap in Mexico -- in New Mexico and in
2 Dallas. NationsBank has refused to disclose how many or
3 which branches it would close. It has also put forth a
4 laughable low divestiture proposal that would allow them
5 to predominate and raise prices in Dallas and a number
6 of New Mexico markets.
7 NationsBank has apparently paid numerous
8 group to come and testify in its support at this public
9 meeting, but the facts, as they say, are the facts.
10 NationsBank said it would institute a
11 referral-up program from NationsCredit to its banks by
12 February of 1997, and NationsBank did not do so. This
13 proposed merger would be anti-competitive in Dallas and
14 numerous New Mexico markets and NationsBank's
15 divestiture proposal is sorely insufficient.
16 NationsBank has refused to disclose what the
17 actual effects of the merger would be, including branch
18 closings.
19 There are other adverse issues including the
20 foreseeable loss of various Bank of America programs
21 ably raised by the California Reinvestment Committee and
22 others. For all reasons stated, this proposed merger
23 should be denied.
24 Thank you for your attention and we will be
25 submitting further written comments. Thank you.
26 MS. SMITH: Thank you very much.
454
1 Ms. Kurudisha.
2 MS. KURUDISHA: Thank you for the opportunity
3 to testify.
4 I am Program Director of the West Contra
5 Costa Business Development Center. I'm also owner of a
6 small business called Associates for Community Change
7 and Development. In the two capacities, I have worked
8 with the West Contra Costa Community for the last nine
9 years.
10 The president, the current president of the
11 board of the West Contra Costa Business Development
12 Center is Mr. Robert Leet, who is Executive Vice
13 President of the Mechanics Bank and the chief lending
14 officer of that bank.
15 The West Contra Costa Business Development
16 Center is a result of years of effort by the West Contra
17 Costa community to work with the banking community to
18 develop an approach to economic development and
19 community development in the West Contra Costa
20 community.
21 We have worked with all of the regulatory
22 agencies and as many as 22 banks in our effort to put
23 together a community reinvestment plan for our
24 community. The years of effort have resulted in the
25 development of the West Contra Costa Business
26 Development Center as an intermediary for community
455
1 development and economic development in the West Contra
2 Costa community.
3 When we look at our efforts to work with Bank
4 of America, we applaud their participation in the
5 community meetings that have been held on banking in
6 West Contra Costa. We also applaud their contribution
7 to the West Contra Costa Business Development Center
8 which has been $25,000.
9 We, however, point out that, while this has
10 supported our effort, it has not matched the request for
11 a five-year commitment on the part of the bank to the
12 community development effort of the West Contra Costa
13 Business Development Center.
14 We would like an opportunity to develop, as
15 an intermediary for our community and give the small
16 cities that we represent an opportunity to develop an
17 urban core process and strategy that allows us to
18 resolve some of the problems that are centered in the
19 low-income and moderate-income communities that we
20 represent.
21 The community bank, which is Mechanics Bank,
22 strongly endorses and calls for additional banking
23 meetings to be held in West Contra Costa where large
24 banks, like BofA, make real contributions to community
25 reinvestment.
26 When the bank sees in the inner core, urban
456
1 inner core of our community, lines that extend out the
2 door of minorities who come in to do checking and other
3 banking services, and downsize their branch so that
4 those lines now extend out into the rain, we do not
5 believe that they are responding to the interests of the
6 community.
7 When they downsize their branch so that
8 merchants in the inner core cannot have change to
9 continue business, we do not view that as contributing
10 to economic development or listening to the needs of the
11 community.
12 We have had Bank of America at the table with
13 us over the last eight years and we applaud the things
14 that they have done in the large urban areas of
15 California. However, most of America is not large urban
16 areas. It is small cities that often, like West Contra
17 Costa, have urban problems to resolve that are growing.
18 We would like an opportunity to take
19 advantage of the open land that remains in our area to
20 develop small businesses that include indigenous
21 population. We call on the Federal Reserve Board to
22 develop a fair and open process for community planning
23 that includes the interest of small cities and economic
24 development and small business development.
25 MS. SMITH: Thank you very much.
26 Mr. Thompson.
457
1 MR. THOMPSON: Yes. Thank you very much.
2 My name is David Thompson. I am the City of
3 Richmond Redevelopment Director.
4 Our Mayor, Rosemary Corbin gave most of the
5 testimony that I would like to give this morning, so I'm
6 not going to burden you with repeating that. A number
7 of the comments that Ms. Kurudisha has provided are also
8 my thoughts.
9 I would, though, like to comment on some of
10 the issues that I see as the Redevelopment Director with
11 regard to relationship with banking institutions
12 generally and with the Bank of America and the possible
13 merger with NationsBank and the acquisition by
14 NationsBank in terms of its impact in our community.
15 The most effective relationships that we have
16 had have been ones where we have been able to develop a
17 personal relationship working with banking officers and
18 where there is a corporate commitment to doing that and
19 to making things happen in communities. Our concern is
20 that through this merger the decision-makers are going
21 to be remote and that the products are going to be more
22 generic and are going to be more difficult to work with.
23 In many cases in our community it is going to
24 take a combination of financing to make projects work
25 including our redevelopment agency and other public
26 funding. Our needs are for revitalizing our older
458
1 commercial neighborhoods.
2 We know that in many cases the bank by itself
3 cannot do that. We have to have a vehicle for sitting
4 down with somebody and saying, "This is the program that
5 we need for this community and we're prepared to do this
6 much, can you do the other?"
7 Let me say that the example that Mayor Corbin
8 noted with regard to Rubicon programs was in fact a
9 situation like that that happened with the bank. Out of
10 the Community Development Bank, it was a very aggressive
11 senior loan officer who came to the city and said,
12 "We're interested in doing business in your city," and
13 we put together a deal with Rubicon programs that
14 involved our city and involved the Bank of America.
15 Our concern, quite frankly, is that with this
16 merger we are not going to be able to have that kind of
17 relationship. So, whether it goes through or doesn't go
18 through, we want to preserve a relationship here in
19 California, particularly in Northern California, so that
20 we can continue that kind of relationship.
21 Earlier the question of the independent banks
22 and the case, this case, the Mechanics Bank, which
23 started in 1906 in Richmond, and it's role in the
24 relationship. I point out over the last -- well, from
25 1994 to 1996, they had a significant growth in their
26 deposit base from the household business sector, while,
459
1 in fact, in West Contra Costa County the Bank of
2 America's deposit base declined.
3 I am concerned about that because, while the
4 community bank has ability to do certain kind of
5 lending, and, quite frankly, they're reasonably
6 effective on the small business side of things, when it
7 comes to the larger transactions, such as the Ford
8 Building, which will be a $70 million project in the
9 City of Richmond, a 500,000 square foot Ford assembly
10 building, that Mechanics Bank is not going to be able to
11 be a serious player in that kind of a project. We've
12 talked with them about it.
13 There are other real estate transactions like
14 that where it is going to be more appropriate for a
15 larger bank.
16 Our concern is, again, as this goes forward,
17 that we preserve the ability to be able to have a
18 relationship and to enter into a real process of
19 discussing West Contra Costa County's community
20 development reinvestment needs.
21 Again, I want to thank you for the
22 opportunity to present here. This is unusual and we
23 appreciate it.
24 MS. SMITH: Thank you very much. Mr. Henry.
25 MR. HENRY: Good morning. Excuse me, I've
26 got a small cold, on my way down here, by the way.
460
1 Thank you once again for allowing me to come
2 before you to state the problem that we have with Bank
3 of America in our area. It's called OMI. Ocean
4 View/Merced/Ingelside District. It's in the southern
5 part of the city where most of everybody that goes
6 through there goes right through our area; however, if
7 you go down the main street over there, which is called
8 Ocean Avenue, you'll find that it also runs, Ocean
9 Avenue, runs all the way out to the ocean.
10 But, when you look at the businesses that's
11 in that corridor, you'll find that for years, years,
12 many, many years, that there was only one bank on that
13 corridor and that was Bank of America. Everything that
14 Bank of America got out of that neighborhood came from
15 that corridor.
16 Now, what I'm alluding to right here right
17 now is Bank of America up and pulled out. We contacted
18 them on many occasions to try to get them to keep that
19 branch open. Why? For the simple reason, this area is
20 an area where most of low-income families are retired.
21 We have many, many seniors that has medical problems,
22 and they closed the bank. They don't have access to a
23 bank in that area within a half a mile. That would be
24 the closest.
25 Now, in this area also, transportation is
26 fairly good, I wouldn't say excellent, but the seniors
461
1 can't use the bank to get to the AMT [sic] machines.
2 That's what they left there, they left the AMT machines,
3 and they expect those people to go there and use those
4 machines. I tell you, that's not a very good idea,
5 because those machines and that bank that they left
6 there was ripped off. The machines was ripped off. So
7 it's not safe for seniors to be in that area at that
8 machine.
9 Now, I would also like to say I disagree with
10 this merger simply because the first of next year all
11 government checks will automatically be electronically
12 transmitted. Now, what does that mean to a senior
13 citizen that has to use an AMT machine? Can't speak to
14 anyone, most of them are afraid to use the machines. I
15 don't like to use them myself and I'm much younger than
16 they are.
17 I'll give you a little example of what
18 happened to me. I used AMT machine, put in the amount
19 of money that I wanted to withdraw, it went through the
20 transaction, I'm looking for my money to come out, lo
21 and behold, no money. So, it was the weekend. So what
22 happened? I had no one to talk to, had no place to go.
23 So, finally, Monday morning came around, I
24 went to the bank and I told them what happened. Well,
25 these things happen. There is no one there to talk to.
26 We need a bank in our area, we need tellers, so that the
462
1 senior citizens can talk to and get service through.
2 I would only ask that this merger not be
3 accepted. Thank you.
4 MS. SMITH: Thank you very much.
5 Ms. Blosser.
6 MS. BLOSSER: Yes. I'm Regina Blosser, and
7 I'm from the Ocean View Merced Heights Neighbors in
8 Action. Ceasar and I are both members of this public
9 safety and neighborhood improvement organization in the
10 Ocean View District of San Francisco.
11 The Federal Reserve sent me a copy of the
12 Bank of America closure policy adopted by the Social
13 Policy Committee of BofA on September 14th, 1993. I
14 wish to read it to you in as much time as I am allowed
15 item by item and then tell you how we believe that the
16 BofA did not follow its own closure policy when it
17 closed our bank on Ocean Avenue.
18 Item, bit by bit, every sentence, "Bank of
19 America is committed to providing access to banking
20 services to all members." Well, obviously it's not
21 committed to providing access to banking to us, because
22 it closed our branch.
23 Number two, "Furthermore, the bank will
24 reasonably strive to minimize any negative impact on the
25 community." BofA didn't strive to minimize any negative
26 impact on our community, in fact, when we make phone
463
1 calls to community development department that wrote
2 this little document, they are never returned. We call,
3 they don't call back. We leave an answer on the
4 answering machine.
5 Number three, "Review and concurrence by
6 corporate community development must be an integral part
7 of the California retail banking branch closure decision
8 process." Well, we would like to see this review
9 because we have not received any justification for
10 closing our branch through any sort of document. We
11 would like to see the review of this policy when it had
12 to do with closing our bank.
13 Number four -- again, we wish to see a review
14 of these closure recommendations.
15 Number four states, "Once a bank has been
16 identified for potential closure, a representative from
17 Corporate Community Development will review corporate
18 recommendations to be sure any negative impacts on the
19 community and its serving area are identified and
20 included in subsequent considerations." Well, we
21 certainly wrote them a lot of letters stating the
22 negative impact we knew would be created in our
23 commercial district.
24 Merchants can't make change anymore, they
25 depend on this. They have to have a secure place to put
26 their deposits. They no longer have this because the
464
1 branch closed. Business has gone down. They have to
2 spend their time going to another bank by car. They
3 cannot simply walk down the street to use banking
4 services that merchants need.
5 These things you would think would have to do
6 with potential negative impacts. The decision was
7 already made to close our bank before any of these
8 impacts were considered. On and on and on.
9 I'll submit the rest to you on a point-by-
10 point basis. This is their own branch closure policy.
11 I don't know how beholden they are to follow this
12 policy. I'll tell you item by item they did not follow
13 it. You can ask anyone of our residents in the OMI if
14 they realize or know they followed this closure policy.
15 This is their own document.
16 This is a map. I put a half-mile circle
17 around every branch in San Francisco that I could find
18 listed in the phone book. You can see it's all covered
19 in green. This obviously is downtown where a lot of
20 branches are needed to serve people. This is industrial
21 district. This is residential -- this little blank spot
22 here is residential area where there are no commercial
23 corridors to locate a bank. It's hilly country with
24 sparsely located houses. All of this is green in the
25 city. This red is our neighborhood. Do you see any
26 green half-mile radius circles going to our
465
1 neighborhood?
2 Now, we've been told that it's only a
3 three-minute drive to the next branch. But every other
4 neighborhood in this city is not required to make -- and
5 it's not a three-minute drive, let me tell you. It's
6 more like 15 or 20 minutes after you've found a parking
7 spot or you've been transferred to another bus to get
8 there. It is certainly not a three-minute ride to the
9 next branch.
10 Anyway, you see my point. I had to show you
11 this in color. This area is the only area that does not
12 have a green half-mile distance to the next nearest
13 branch. A lot of these overlap, lot of branches are
14 less than a half-mile in other neighborhoods, Bank of
15 America branches.
16 The yellow are what we call banker's rows.
17 There is a banker's row here, they passed resolution at
18 the planning department stating they wanted no more
19 banks on their commercial district because all they had
20 were banks and no practical places like grocery markets
21 or shoe stores, nothing but banks. And we can't even
22 find one bank. And we have tried, we have tried to find
23 Sterling.
24 The Mayor's Office of Economic Development
25 asked Sterling Bank to come to our neighborhood. When
26 they met with Bank of America representatives to take
466
1 over the old bank building and to use as a Sterling
2 Bank, Bank of America refused to remove its ATMs. So
3 Sterling did not want to locate there.
4 We have tried looking for, you know,
5 consumers unions, credit unions, that might expand their
6 field of membership. But you might know that the
7 American Bankers Association brought a lawsuit against
8 credit unions and presently credit unions cannot expand
9 its fields of membership to neighborhoods like ours that
10 need some kind of service, banking service.
11 Presently there is a bill in the house, and
12 perhaps it will be passed, and we will be able to find a
13 credit union, but right now we're stymied. We want a
14 bank and we can't get one.
15 Numerous non-profits have come to you to
16 state their satisfaction with these bank's financing of
17 their programs. This is fine, but the only thing our
18 neighbors and merchants want is a bank. We feel no
19 desire for charitable giving.
20 That's what we want, we want to take care of
21 ourselves and we want to be independent, self-sufficient
22 and prosperous, and we need a bank. That has been
23 denied us, and our attempts to get a bank have been
24 sabotaged by the Bank of America by not allowing ATMs
25 for a new bank, by the Bankers Association by not
26 allowing us to pursue a credit union as an alternative.
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1 We think that we really must talk about this
2 merger and how they comply with the Community
3 Reinvestment Act.
4 MS. SMITH: Thank you very much. Please do
5 submit your complete statement and your map that you
6 have outlined in color as well.
7 Do you have questions?
8 MR. FRIERSON: Mr. Thompson, could I ask you,
9 do you work with both in-state and out-of-state banks as
10 a redevelopment director.
11 MR. THOMPSON: We work primarily with
12 in-state banks.
13 MR. FRIERSON: Could you just elaborate a
14 little bit, contrast your experiences working with
15 in-state versus out of state banks?
16 MS. SMITH: Would you move the mike closer to
17 you?
18 MR. THOMPSON: Sure. We haven't had much
19 experience to out-of-state banks. They don't market to
20 us. Where we do run into -- where we do work with them
21 is a result generally of a developer bringing the
22 out-of-state financing in toW. Sometimes it is banks,
23 sometimes it's insurance companies and other financial
24 institutions. But, for the most part, we rely on
25 working with the institutions that are here that are
26 headquartered here and with whom we can develop
468
1 relationships and with whom our non-profits develop
2 working relationships.
3 I have to tell you a brief story. I was
4 working with Bridge Housing on a housing development
5 project, and we were negotiating and I said, "Well,
6 what's in your commitment letter?" And they said, "What
7 commitment letter? We just call them up and tell them
8 what we need." Now, it would be nice for all of us to
9 have that kind of relationship and Bridge is a very
10 large and experienced housing development group.
11 But what it said was that the corporate
12 relationship that existed between Bridge Housing and
13 that financial institution, it's the other big one in
14 town, was such that they were able to do things to make
15 projects move and get done that you wouldn't be able to
16 do if you didn't have those kinds of senior executive
17 kinds of relationships that are both formal and
18 informal.
19 MS. SMITH: Thank you very much for coming
20 this morning and do submit your complete statements for
21 the record. You have until next Friday to do so, but
22 the sooner you can do it the better. Thank you.
23 (Recess taken.)
24
25
26
469
1 MS. SMITH: I think we're ready for Panel 20.
2 And my notes say that I should start with -- is it
3 Mr. Serpan?
4 MR. SERPAN: Yes. You want me to start?
5 MS. SMITH: Please.
6 MR. SERPAN: My name is Rhea Serpan and I'm the
7 President and CEO of the San Francisco Chamber of
8 Commerce. And I appreciate this opportunity to speak on
9 behalf of the Chamber regarding the merger of BankAmerica
10 and NationsBank.
11 Since its founding in 1904 in the city here,
12 BankAmerica has been integral to the development of the
13 business community in San Francisco. The Bank has been a
14 long-standing member of the San Francisco Chamber of
15 Commerce. In fact, A.P. Giannini was on its board and
16 that involvement continues to this day. BankAmerica has
17 generously supported the Chamber's many activities,
18 including providing resources to our business development
19 programs and contributing both expertise and funding. For
20 instance, BankAmerica has contributed $250,000 over three
21 years to SF Works, the welfare-to-work initiative created
22 by the Chamber and the Committee on Jobs and United Way
23 here in the city.
24 BankAmerica has been a generous contributor to
25 economic development projects, including a multi-year
26 commitment to investment in the San Francisco Partnership,
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1 a public-private partnership launched by the Chamber to
2 attract and retain business and jobs in San Francisco.
3 And BankAmerica has been a strong supporter and
4 contributor to the Bay Area Sports Hall of Fame Youth
5 Fund, Business Arts Council, Business Volenteers for the
6 Arts and Leadership San Francisco, all chamber programs.
7 And throughout its history, BankAmerica has been
8 involved and a responsible corporate participant in the
9 San Francisco community. BankAmerica recognizes that
10 small businesses are the job creation engine here in our
11 city and drive the economy and has made a substantial
12 investment in San Francisco area firms, and currently the
13 bank has small business loan commitments in the Bay Area
14 that total $708 million. And since 1990, the Bank has
15 loaned 235 and a half million dollars to support the
16 construction of 4,500 affordable housing units in the
17 region. And the bank has contributed 14 million in the
18 past three years to arts, education and health and human
19 services, including a $5 million commitment to the United
20 Way.
21 The Chamber fully expects BankAmerica to continue
22 to play an important leadership role in our community. We
23 believe that as their business grows, and it will, that
24 their corporate involvement will also expand.
25 BankAmerica's merger with NationsBank along with
26 the announced merger of Wells Fargo and Northwest Bank
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1 will reaffirm San Francisco as a national and global
2 banking center. BankAmerica is expected to take advantage
3 of and fully participate in our region's growth and to
4 benefit from the strategic advantages of doing business in
5 San Francisco. San Francisco is the center of a strong
6 and growing Bay Area economy, and is the gateway to the
7 Asian marketplace and the place where Silicon Valley does
8 its banking.
9 While there will undoubtedly be some job
10 dislocation, new job opportunities are going to be created
11 as a result of this merger. And, of course, it's too
12 early to tell and estimate with any accuracy exactly what
13 the net effect might be on jobs, but I'm convinced that
14 the combined strengths of the two institutions as they
15 come together creates the potential for job growth that
16 may not have otherwise been possible. It is significant,
17 I think, that the banks' combined corporate and investment
18 banking headquarters are going to be here in
19 San Francisco, that's an important part of the banking
20 institution.
21 The Chamber is proud of the strengths of our
22 community and we're confident in the continued growth of
23 our economy and we strongly believe that BankAmerica will
24 continue to be a major contributor to both. Thank you.
25 MS. SMITH: Thank you very much. We'll go to
26 Ms. Ferniza.
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1 MS. FERNIZA: Thank you. Good morning, my name
2 is Sandra Ferniza and I'm President and CEO of the Arizona
3 Hispanic Chamber of Commerce located in Phoenix, Arizona.
4 The Chamber of Commerce is pleased to have the
5 opportunity to testify on behalf of the proposed Bank of
6 America and NationsBank merger. In an era of decreasing
7 public assistance to individuals of low and moderate
8 income and small, women or minority-owned businesses,
9 banks, with the encouragment of the Community Reinvestment
10 Act and the conscious of its board members, are a major
11 source of hope to those who dream of home or small
12 business ownership.
13 Institutions such as Bank of America have been a
14 source, both directly and indirectly, of credit and
15 capital to those who lack access to conventional financial
16 services through innovative projects and community
17 partnerships. The current industry trend of bank
18 consolidation poses serious questions for those of us who
19 work with financial institutions in an effort to encourage
20 investment, leveraging, financing and creation or
21 preservation of jobs in less affluent communities.
22 However, our experience with Bank of America has led us to
23 include that the proposed merger will result in a
24 continuation and/or expansion of the bank's commitment to
25 serving poor and diverse communities.
26 Bank of America has been an active member and
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1 strong corporate partner of the Arizona Hispanic Chamber
2 of Commerce since 1980. In addition, it was a founding
3 member of Los Amigos de AHCC, a corporate advisory group
4 that provides both financial and business value to the
5 chamber and its small business members. Bank of America's
6 recognition and understanding and commitment to the
7 growing Hispanic market is borne out in two key areas for
8 our chamber. One, in a publication known as DATOS, Focus
9 on Arizona's Hispanic Market, of which the bank is a
10 premier sponsor, and has reached an audience of
11 non-believers about the potential Hispanic market, we are
12 extremely grateful for that opportunity. And, two,
13 through our Minority Businesses Development Center which
14 the bank has provided both financial and technical
15 assistance to the mission of the greater Phoenix Minority
16 Business Development Center which the chamber operates.
17 Also, a member of the bank staff serves on our board of
18 directors and its bank officers and staff regularly
19 participate in chamber business seminars, host networking
20 mixers to highlight procurement opportunities and serve as
21 speakers and instructors in our business education series
22 known as NxLevel and Su Plan de Negocio. So they've put
23 their money where their mouth is, not only in terms of
24 dollars, but in terms of active participation with the
25 chamber and its memberships.
26 Bank of America has also demonstrated a
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1 commitment to diversity in the board room at all levels of
2 management and in a unique bilingual customer service that
3 has thrived in our valley called CuentaTel. Through
4 partnerships with organizations like others and ours, it
5 supports training to consumers, business owners and others
6 who play a promising and important role in developing the
7 social and economic fabric of America.
8 Most importantly to the chamber, the merger
9 presents new opportunities for the local business
10 community. A nationwide network that has greater access
11 to global financial markets is consistent with the growing
12 presence of mutual customers seeking to retain and expand
13 their business success and it is particularly important in
14 Arizona as a border state. It also presents greater ease
15 of service for individual consumers whose mobility is a
16 vital part of an expanding commodity and economy.
17 The chamber expects the activities previously
18 mentioned to continue after the merger of the two
19 institutions. I want to reiterate that, based on
20 experience, we feel confident that the bank will not only
21 continue its outstanding community service but also seek
22 new ways to efficiently and effectively serve the needs of
23 a diverse customer base, both large and small. That
24 commitment we feel has been assured through the pledge of
25 the $350 billion to serve communities most in need.
26 In addition, let me add that personally my
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475
1 husband and I have been Bank of America customers since it
2 assumed responsibility for the former Western Savings &
3 Loan Association and its Security Pacific institutions.
4 That transaction convinced me that it's possible to
5 survive and thrive from a change at Bank of America while
6 maintaining a high level of customer service. We are all
7 of us resistant to change but we must look for the new
8 opportunities that change brings us. Thank you for your
9 attention.
10 MS. SMITH: Thank you very much. Mr. Tierney.
11 MR. TIERNEY: Presiding Officer Smith and panel
12 members, thank you for this opportunity to provide
13 testimony at this hearing. My name is James Tierney and I
14 have asked for this time to describe my very positive
15 working experience with Bank of America staff in Portland,
16 Oregon. I'm the Deputy Director of Community Action Team
17 in charge of community development. We're a community
18 based nonprofit anti-poverty agency serving three rural
19 counties in northwest Oregon. Like many community action
20 agencies around the country, we provide a number of
21 coordinated anti-poverty programs such as Head Start,
22 child and family development programs, Low Income Energy
23 Assistance and homeless assistance. In the area of
24 community development, we also assist our communities with
25 the development and rehabilitation of affordable housing,
26 affordable homeownership programs, single-family
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476
1 rehabilitation and community facilities development.
2 My understanding of the Community Reinvestment
3 Act is that a lender is expected to actively seek ways to
4 meet the credit needs of its community. As a community
5 organizer working in a rural area, I find the communities
6 to find themselves usually at populations no larger than
7 10,000 persons. In our three county service area, two of
8 our communities are served by one bank based in the three
9 county area. All other commercial banking is done with
10 banks which serve all or most of the state, usually many
11 states. Given the realities of the commercial banking
12 industry in the 1990s, each of our communities must look
13 outside the community for some or all of its banking
14 needs.
15 While working in our communities have been
16 approached by local bankers representing several banks,
17 with one exception, these bank officials have understood
18 very little about community development. Rather than
19 offering useful partnerships, they have sought information
20 and offered referral services. Bank of America has been
21 different. In our community development work, no bank,
22 local or otherwise, has supported our community
23 development efforts like Bank of America.
24 In the last eight years, I've arranged three
25 loans with the help of Bank of America staff. I've also
26 arranged one with a statewide nonprofit bank consortium
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477
1 and one with a government agency. The difference in
2 support service is marked. For me, the irony of these
3 experiences is breathtaking. I feel that I have had to
4 fight tooth and nail with the nonprofit government agency
5 to simply get good loans underwritten. In these cases I
6 felt that my lending partner was seeking to underwtie the
7 transaction in a way that reduced my agency's development
8 and operating cushions to such low levels that it would
9 deny us sufficient capacity to continue our work.
10 Working with the Portland Bank of America staff
11 is an entirely different experience. They appear to be
12 actively planning for our future. The bank staff has
13 encouraged us to take on new roles increasing our
14 efficiency and effectiveness. During our campaign to
15 organize and develop the capacity of other nonprofits
16 working in our three county service area, we received bank
17 support in the form of time, expertise and money. The
18 bank staff has taken a personal interest in the
19 development and capacity of my agency and me personally.
20 This has taken the form of scholarships, supportive
21 information and advice.
22 I cannot speak about any of the Bank of America
23 CRA work except that which I've seen in Portland nor do I
24 have any experience with NationsBank. However, I can say
25 the Bank of America and its Portland's staff has made a
26 huge difference in our ability for us to do our work.
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478
1 Thank you.
2 MS. SMITH: Thank you. I don't know how to
3 pronounce your name.
4 MS. HAUGER: It's Hauger.
5 MS. SMITH: Ms. Hauger.
6 MS. HAUGER: Thank you. Thank you for the
7 opportunity to allow me testify for the Community Housing
8 Resources of Arizona located in Phoenix on behalf of our
9 experience with Bank of America, Arizona. I'm Executive
10 Director of Community Housing Resources of Arizona. We're
11 a small HUD approved housing counseling agency established
12 in 1987 to promote fair housing and equal housing
13 opportunity for residents of Phoenix.
14 In 1990, we expanded our services to include
15 pre-purchase counseling and affordable homeownership
16 programs. In the eight years since then, over 2100 low
17 and moderate income families have completed our one-on-one
18 counseling program and become homeowners. And over 600
19 have received downpayment closing cost grants. On
20 average, 27 families per month become homeowners taking
21 part in our services.
22 In order to make the dream of homeownership a
23 reality for lower income and minority households,
24 Community Housing Resources relies heavily on the support
25 of financial institutions. Over the last six years, Bank
26 of America Arizona has been instrumental in our success by
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479
1 providing significant funding and management support. We
2 sincerely hope that the mutually beneficial partnership
3 with the bank will continue after the merger is completed.
4 Bank of America has recognized the value of pre-purchase
5 counseling in preparing lower income households for
6 homeownership by contracting with our agency to provide
7 pre-purchase counseling for low income first-time home
8 buyers.
9 BofA has provided first mortgages for our
10 clients, have given us generous grants to support our
11 counseling program. These grants not only have provided
12 operating funds for us but they've also provided the very
13 necessary matching funds needed to secure government
14 grants for downpayment assistance programs and
15 homeownership counseling.
16 In addition to this generous financial support,
17 BofA Arizona employees James Rayburn, Juan Salgado and
18 Darryl Tenenbaum has unselfishly helped and guided our
19 small agency by providing hundreds of hours of management
20 service. They have also served on our board of directors
21 and provided technical assistance which has ensured that
22 we have been able to meet our goals and missions.
23 In addition, as a director since 1990, James
24 Rayburn has saved our organization thousands of dollars by
25 providing countless hours of pro bono legal advice.
26 Community Housing Resources strives to provide
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480
1 homeownership opportunities for underserved populations,
2 including persons with disabilities and ethnic minority
3 households. Over 60 percent of the clients that we serve
4 are Hispanic and more than one-third of all of our
5 one-on-one counseling sessions are conducted in Spanish.
6 Our main concern with the proposed merger is that
7 our low-income and minority clients will be underserved by
8 the creation of such a large bank. We are, however,
9 encouraged by recent articles describing Nationsbank's
10 increased efforts to serve the growing Hispanic community
11 and we trust that those efforts will extend to all
12 traditionally underserved communities in Arizona.
13 We support the merger with the expectation that
14 the current level of support for our organization,
15 including the employee involvement from the bank, will
16 continue and that the new bank will provide increased
17 homeownership opportunities for the low-income and
18 minority communities we serve. Thank you.
19 MS. SMITH: Thank you very much. I have a
20 question for you on the homeownership counseling. Does
21 your organization participate in the application process
22 or is that handled by bank personnel?
23 MS. HAUGER: That is handled by bank personnel.
24 MS. SMITH: So how does your operation work,
25 then, on the counseling side?
26 MS. HAUGER: What we do is act as though we are a
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1 lender as far as looking at all the information on the
2 income, debt, credit and cash resources of our clients.
3 We look at that, we advise them on their ability to
4 qualify for a mortgage, whether we think that they can
5 meet minimum lender requirements. We give them
6 information on a number of types of loans that are
7 available showing them what it would cost them, what they
8 can afford getting that type of loan. And also, you know,
9 what the benefits might be from one type of loan to
10 another. Based on that, then our clients make their
11 decision on the type of loan they would like. And we
12 prepare all the information for them to take to the
13 lender.
14 MS. SMITH: And you direct them to several
15 lenders or --
16 MS. HAUGER: Yes. So they, basically, make the
17 choice on what type of product they want and what lender
18 they would like to go to.
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?
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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.
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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.
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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
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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,
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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
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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
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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.
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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
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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
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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.
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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
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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.
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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
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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
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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.
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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
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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
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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.
18 MS. SMITH: We'll first have David Noguera
19 speaking for Mayor Elihu Harris, Mayor of Oakland.
20 MR. NOGUERA: Thank you. On behalf of the Mayor
21 of Oakland. As the mayor of a city where the vast
22 majority of the population consists of families of color
23 and is in the shadow of the largest financial institution
24 in California, I would like to express some of my concerns
25 regarding the merger with an institution that will become
26 an absentee landlord for all of Oakland.
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1 Community reinvestment and economic redevelopment
2 must be more than a national pledge. To be meaningful,
3 there must be specifics for each affected community,
4 particularly communities that have historically been
5 underserved or redlined such as Oakland.
6 In California today, many financial institutions
7 have made specific pledges and set specific goals for
8 minorities and women for lending, for contracts and for
9 charitable contributions. I am concerned that NationsBank
10 is unwilling to do so.
11 Historically, our city and minority communities,
12 in particular, have been the object of general promises
13 that have failed to produce results. I'm also concerned
14 that the prestigious local community groups as well as
15 national minority organizations that know the work of
16 NationsBank, such as the National Black Chamber of
17 Commerce, the National Black Business Council and the
18 Asian Business Association and the Latin Business
19 Association, have all criticized this proposed measure due
20 to lack of specificity for underserved communities. I am
21 also concerned that, while other institutions have
22 committed to diversity goals that reflect our state's
23 extraordinary diversity, NationsBank has stated that it
24 will not set any goals or release any data on their
25 achievements.
26 Until the chairman of BofA and NationsBank put in
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1 writing the type of specifics that their competitors have
2 produced regarding minorities and underserved communities,
3 I believe that it would be best to either deny the merger
4 or, in the alternative, impose such a condition of
5 approval of the merger. Thank you.
6 MS. SMITH: Thank you very much. Mr. Mosher.
7 MR. MOSHER: Thank you. Good morning, my name is
8 Mark Mosher, I'm Executive Director of the Committee on
9 Jobs, a coalition of 33 of San Francisco's largest private
10 sector employers.
11 Our organization focuses on public policy issues
12 affecting the city's economic vitality and quality of
13 life. During its eight-year history, Jobs has organized
14 corporate community involvement in a few key areas,
15 including major youth hiring and welfare-to-work
16 initiatives. It is in this context that I would like to
17 address the proposed merger and what we believe to be Bank
18 of America's post-merger commitment to San Francisco.
19 In every initiative Committee on Jobs has
20 undertaken, whether it is our effort to replace cuts in
21 the federal Summer Youth Employment Training Program or
22 the organization of hundreds of business volunteers
23 through Christmas in April, Bank of America has taken a
24 leadership role. The bank has demonstrated to us that
25 this leadership role will not decline in the wake of a
26 merger.
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1 When the local business community came together
2 to address the challenge of welfare-to-work, Bank of
3 America led the way. Last year, the bank contributed
4 $250,000 to found San Francisco Works, an effort to help
5 transition 2,000 public assistance recipients into
6 self-sufficiency over the next three years. Bank of
7 America's involvement in this effort transcends checkbook
8 philanthropy. Bank Chairman Dave Coulter has personally
9 involved himself in the organization, participating in
10 board meetings, loaning his staff to counsel San Francisco
11 Works in current training methods and committing
12 employment opportunities to program graduates. The bank
13 has communicated to us that its commitment in each of
14 these areas will not decline after the merger.
15 I value Bank of America's role in San Francisco,
16 and I was surprised and disappointed when I heard the
17 headquarters would be moved to Charlotte. The move is
18 definitely a blow to the city's prestige. However, in
19 practical terms, David Coulter and half of the merged
20 bank's executive management team will remain in
21 San Francisco, several key operations will remain
22 headquartered in San Francisco, and the deep spirit of
23 community involvement and fostered by the bank's current
24 leadership will continue.
25 We urge approval of the merger. Thank you.
26 MS. SMITH: Ms. Duncan.
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1 MS. DUNCAN: Yes, I am Emily Duncan, the
2 Executive Director of the Snohomish County Private
3 Industry Council. Snohomish County is located in
4 Washington State and it is just north of King County where
5 Seattle is.
6 We are a private industry council and we are the
7 managing partner for the Job Training Partnership Act
8 which we administer in Snohomish County. This law is
9 enacted to provide training funds for low-income youth and
10 adults and dislocated workers, but it's not the Job
11 Training Partnership Act that I want to talk about today,
12 it's Down Home Washington. Because that's the other half
13 of us.
14 Down Home Washington started ten and a half years
15 ago as what has now come to be known as Microenterprise
16 Program. In those days, we didn't know the name. What we
17 wanted to do was provide entrepreneurial training for
18 low-income women, half of whom were welfare recipients.
19 And we did do this. What is remarkable about this
20 particular experiment is that, although we had the
21 operating funds through our own Job Training Partnership
22 Act moneys, we didn't have a loan fund. And in those
23 days, no one, to speak of, had heard of Microenterprise
24 and I don't even know if the word had been invented yet.
25 But Sea-First, which is Bank of America in
26 Washington State, stepped up to the plate and they
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1 provided the first dollars for that initial loan fund. It
2 wasn't a lot of money but it was incredibly important
3 because they were out front and in the leadership position
4 and it ended up leveraging many, many times, more than 15
5 times the amount of money that they contributed. So they
6 have been very responsive. And they are concerned about
7 the -- their position in the community and they try to
8 fill the gaps where those exist and where they understand
9 them.
10 One of the most incredible things about this
11 first program is that (unintelligible) came to all three
12 of the graduations over a three year period. She didn't
13 have to do that but I know that she enjoyed it as much as
14 I did.
15 We are very proud to be one of the grantees of
16 Sea-First/Bank of America in Washington State. Sea-First
17 also recognized the need for funding in rural areas and,
18 in fact, Bank of America now has a major rural area
19 initiative.
20 We support this merger. We do believe in the
21 commitment of the $350 billion over the period of time.
22 We do believe that greater resources will be made
23 available through it. We also know that NationsBank is
24 very supportive of the kinds of things that
25 Microenterprise is involved in. And without the support
26 of organizations like Sea-First, we would not be in the
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1 position we are today where we have about $4 million
2 available in loan funds that cover 16 counties in the
3 State of Washington. From an initial operating budget of
4 $29,000, we now have an operating budget of $375,000, and
5 that growth has been fueled by support from Sea-First/Bank
6 of America.
7 We do have a concern and that concern is in
8 Washington State, there are no banks headquartered in
9 Washington State of any size any longer. And our concern
10 is that we will be almost invisible, and so along with
11 other groups from the Rural 2,000 Committee, we support a
12 fair allocation of resources by region and also by rural
13 and urban and other designations. Thank you very much.
14 MS. SMITH: Thank you. Ms. Singla.
15 MS. SINGLA: Good morning, and thank you for the
16 opportunity to testify regarding the proposed merger
17 between NationsBank and Bank of America. My name is
18 Indira Singla and I'm the President and CEO of Automation
19 M.H, Incorporated of Dallas, Texas.
20 We are a small woman-owned computer systems
21 integration company based in Dallas. I was also a
22 delegate from North Texas to the White House conference on
23 small business in 1995. As a small business owner, I take
24 deep interest in the affairs that affect all small
25 businesses, including minority and women-owned businesses.
26 Our relationship with NationsBank is a three-fold
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1 relationship. First, as a business client, our banking
2 relationship with NationsBank goes back to over ten years.
3 This relationship is based on the commitment that
4 NationsBank has for small business development. I have
5 found them very sensitive to the needs of small business
6 community. NationsBank has supported us in times of need
7 through loans, lines of credit, and other services
8 numerous times. Over the years, we have come to depend
9 upon NationsBank and their employees for exceptional
10 quality service and commitment to assist small businesses.
11 The second relationship we have with NationsBank
12 is a vendor relationship. NationsBank has been our
13 customer for over three years. During this period, we
14 have supplied them with mid-range units, hardware,
15 software, integration consulting and network services. We
16 have worked with their Asset Management Interest
17 Department, Capital Markets Department and the Strategic
18 Technologies Group. Most recently, we provided service
19 for their E-mail capabilities between NationsBank and Bank
20 of America.
21 Over the years, NationsBank -- as a small
22 business owner knows, that all of this will not be
23 possible if NationsBank did not have a commitment to give
24 an opportunity to small business like ours to participate
25 in such opportunities. They have demonstrated this
26 commitment by participating in many, many small business
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1 development activities in Dallas.
2 Thirdly, as NationsBank, as it applies to the
3 community relationship, as a citizen of Dallas, I have
4 observed NationsBank to play a leading role being the
5 community investment expert in the financial services
6 industry through the delivery of special programs for low-
7 and moderate-income individuals and communities.
8 NationsBank is an active participate in the South Dallas
9 Economic Development Program. I see this merger bringing
10 more opportunities to thousands of small businesses across
11 the nation just like Automation Image. So I support this
12 merger. Thank you.
13 MS. SMITH: Thank you very much for your
14 testimony. Next, we have Mr. Esquibel.
15 MR. ESQUIBEL: Good morning. My name is Eduardo
16 Esquibel, I am the Executive Director of United Housing
17 and Educational Development Corporation. United Housing
18 is a nonprofit 501C3 organization formed in 1990 in the
19 State of Arizona that provides affordable housing in the
20 rural areas of Pima and Pinal Counties. United Housing is
21 currently under contract with the United States Department
22 of Agriculture, Rural Housing Services, to operate and
23 provide technical assistance under the 523 self-help
24 program. This program targets families in need of safe,
25 decent and affordable homes. Families qualify for a
26 housing loan from Rural Development called a 502 direct
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517
1 loan program based on their income and need. The families
2 income cannot exceed 80 percent of the area's median
3 income. Subsidy is awarded to families based on family
4 size and income.
5 These families are considered low and very low
6 based on income standards. United Housing is pleased to
7 be a partner with Bank of America's Community Development
8 Bank. Bank of America has already established an
9 effective partnership which has enabled local self-help
10 housing organizations like ours to expand the opportunity
11 for self-help families to achieve homeownership.
12 Bank of America in 1997 established its Rural
13 2,000 Initiative which is addressing rural concerns of
14 reaching out to markets that either no service is
15 available and/or is underserved. Bank of America's Rural
16 2,000 Initiative will make available funds to provide
17 mortgage loans by partnering with the Department of
18 Agriculture as well as with Fannie Mae to start the 502
19 direct blended loan program which is being piloted through
20 the Rural 2,000 Initiative. The 502 direct loan program
21 current funding level is $1 billion this fiscal year. The
22 rural initiative is assisting nonprofit organizations with
23 lines of credit for construction loans and infrastructure
24 loans that will provide critical resources to facilitate
25 development of building sites for low-income families who
26 are willing to commit the time and energy to build their
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1 homes for themselves and their neighborhoods.
2 United Housing has demonstrated success in the
3 development of self-help housing. In fact, since 1990,
4 United Housing has assisted 102 families in the successful
5 construction of their homes through the mutual self-help
6 program. The State of Arizona is currently ranked No. 2
7 in the United States for providing self-help homeownership
8 under the Department of Agriculture's national self-help
9 program. United Housing was nationally recognized in 1996
10 by the Fannie Mae Foundation as a recipient of the Maxwell
11 Award of Excellence for the production of low-income
12 housing. At the same time there are many families who are
13 waiting for the opportunity to join with their neighbors
14 to build better homes for themselves and their children.
15 One of the continuing obstacles we face is the difficulty
16 of acquiring affordable building sites. Bank of America
17 funds through the Community Development Bank has assisted
18 United Housing in the development of suitable building
19 sites.
20 The opportunity of this merger can provide
21 greater resources to nonprofits like ourselves in
22 partnering with the federal resource dollars that have
23 been available in the past to operate programs such as the
24 self-help program. The Bank of America/NationsBank $350
25 billion commitment to provide funding resources, as I have
26 discussed earlier, will have an impact on rural area
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1 markets that have been underserved and misunderstood for
2 years.
3 Bank of America has a proven track record in
4 effectively managing the Community Development Bank by
5 providing funds which has created homeownership
6 opportunities for hard working low-income families within
7 our service area and throughout rural America. United
8 Housing supports the merger between Bank of America and
9 NationsBank.
10 Thank you for the opportunity to speak on behalf
11 of the families that we served and United Housing. Thank
12 you.
13 MS. SMITH: Thank you very much. Mr. Price
14 MR. PRICE: Thank you very much. Good morning.
15 My name is Al Price, I'm from Beaumont, Texas, I'm a
16 retired captain for American Airlines, and for the past 21
17 and a half years, I've been a member of the Texas House of
18 Representatives. Today I represent the Southeast Texas
19 Community Development Corporation, Incorporated, SETCDC
20 which I serve as president.
21 SETCDC is certified as a CHDO by the Texas
22 Department of Housing and Community Affairs to serve rural
23 Texas and certified as a CHDO by the Cities of Beaumont,
24 Port Arthur and Orange.
25 In the past five years, SETCDC has completed new
26 construction and rehab in excess of $2.2 million. We
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1 anticipate construction of 250 new homes and the rehab of
2 over 100 in the next three years. As we expect to also
3 expand into rural Texas.
4 Some eight years ago, when we were reviewing the
5 lending practices of banks in our community, I met Ms.
6 Cathy Bessant of NationsBank, she came to Beaumont to work
7 with us to talk about achieving the aims of the Community
8 Reinvestment Act. She was very cooperative and I'm very
9 pleased to know that she will be involved in this great
10 effort.
11 Our organization has developed a business
12 relationship with NationsBank which includes the
13 arrangement of permanent financing of loans for our
14 homeowners. In this manner, we've been successful in
15 addressing the housing and banking needs of a clientele
16 that is traditionally below the regular commercial banking
17 floor. Through our Homebuyer Education Program, we work
18 with persons who are currently renters. We inform them,
19 encourage them, cajole them, if necessary, spurring them
20 to dare achieve the dream of homeownership.
21 Virtually every one of our clients utter in
22 disbelief at closing, "I never thought I'd ever own my own
23 home." These are new homeowners. These are first-time
24 home buyers, these are new mortgages in our community,
25 this is new money being generated, this is private
26 enterprise doing what it can do best and much better than
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521
1 the government. This is removing people from the public
2 dole. This is putting housing and economic development in
3 the private sector without dependency on public funds.
4 Upon learning of the proposal of NationsBank to
5 make $350 billion available to address the needs of
6 low-income and rural areas, I contacted NationsBank to
7 discuss ways that we and they could partner with local
8 officials and community leaders to plan and execute
9 locally conceived programs that would benefit the
10 community while concurrently achieving the goals of
11 NationsBank and SETCDC. This $350 billion infusion
12 represents a pool of resources that will allow communities
13 to do housing and economic development on a scale that
14 will be both trendsetting and transforming. And if done
15 correctly, it will allow a level of efficiency that can
16 significantly stretch those dollars.
17 I've submitted a proposal to NationsBank to
18 establish a pilot program in a small county in southeast
19 Texas. This proposal, which could be quickly implemented,
20 calls for our convening the county commissioners plus the
21 mayors and council members of each city with a population
22 of 10,000 family -- population in that county, along with
23 the officials of HUD, the State of Texas, local nonprofit
24 groups and the private sector for the purpose of assisting
25 local communities in the creation of a plan for housing
26 and economic development.
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522
1 Such a procedure could be replicated anywhere and
2 at will. Through SETCDC and other nonprofits, NationsBank
3 will then be able to extend its financial tentacles into
4 hamlets that are presently inaccessible, thereby
5 transforming old communities.
6 Homeownership is the cornerstone of safe,
7 desirable neighborhoods and, therefore, is essential to
8 any plan to revitalize communities. People who own their
9 own homes care about their streets, their property values
10 and their schools. They generate business, they pay
11 taxes, and more often than not, they vote. By providing
12 safe, sanitary desirable homes to low- to moderate-income
13 families, CHDO will work to fend off the renters'
14 mentality with this emphasis on dependency, consumership
15 and apathy and replace this renters' mentality with a
16 homeowners' mentality with this emphasis on independence,
17 productivity and involvement.
18 Ladies and gentlemen, because I'm so pleased to
19 see this expression of corporate responsibility and
20 goodwill and because I view this as a definitive measure
21 to put affordable housing and community development firmly
22 into the private sector and away from dependency on
23 government handouts. I'm very pleased to support this
24 merger. Thank you.
25 MS. SMITH: Thank you very much. Ken, you have a
26 question?
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523
1 MR. BINNING: I would like to ask Mr. Mosher a
2 question, please. We heard a number of speakers express
3 concern that support and understanding for California
4 needs would fall off when the headquarters is moved to
5 North Carolina. And I believe you stated that you and
6 your organization have been convinced by BofA that that
7 won't happen and I was just curious if you could elaborate
8 a little on what types of information or assurances from
9 them have given you that confidence?
10 MR. MOSHER: I have to admit that my experience
11 is very parochial in that my organization's jurisdiction
12 is that of San Francisco. I happen to know the chairman
13 of Bank of America through my organization and through a
14 lot of the community initiatives that we sponsor. And, if
15 anything, in the wake of the merger announcement, I think
16 we've seen really expanded commitment to some of the
17 programs that we've started, such as San Francisco Works,
18 the welfare-to-work initiative, and we've seen that in the
19 form of really a commitment that has gone from at the
20 outset a financial commitment to the program, what has
21 turned into, in some cases, senior executives of the bank
22 coming out and expressing an interest in helping local
23 nonprofit organizations do a better job of training people
24 coming off of public assistance to what I would
25 characterize as really up-to-the-minute specifications for
26 jobs that are available in the banking industry.
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524
1 So what we've seen is -- I mean, first of all, a
2 commitment to see this program through to whatever
3 conclusion, you know, its board of directors decides it
4 wants to reach. But also the bank giving more than
5 dollars sending senior executives to, in effect, go out
6 and serve as consultants to some nonprofits that are doing
7 job training in an effort to try and get public assistance
8 recipients trained for jobs in this particular bank. And
9 the commitment that has been made is that they not only
10 want to make a financial commitment and a commitment of
11 expertise, that they want to integrate former public
12 assistance recipients into the bank post-merger.
13 MR. MENDELL: Thank you.
14 MS. SMITH: Mr. Price, you used the term that
15 sounded like CHDO and you may have explained what it was
16 earlier but I missed it.
17 MR. PRICE: I'm sorry, that's an acronym for
18 Community Housing Development Organization.
19 MS. SMITH: So CHDO.
20 MR. PRICE: CHDO. Some bureaucrat thought that
21 up.
22 MS. SMITH: Do you have any questions? Well,
23 thank you very much, we appreciate your coming this
24 morning to talk to us. And if you have any additional
25 comments that you want to submit for the record, you have
26 until next Friday but not later than 5:00 o'clock eastern
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1 MS. SMITH: Good afternoon. I'm reminding the
2 witnesses about our timing system. We have a timer who
3 will give you a one-minute message when you have one
4 minute remaining. She'll hold it up. And then one
5 minute later -- we hope that you will see it. Sometimes
6 you may not because you'll be looking at your text. One
7 minute later, she will hold up the time expired message.
8 And then, if you still haven't looked up, then we have
9 the gong. So that's the system that we'll be using. Are
10 we all set?
11 This is Panel 23, and we're going to start with
12 Dr. Welbon.
13 DR. WELBON: Good evening, Chairman Smith and
14 to the members of the board. We are here representing
15 the Pastors and Ministers Congress of San Francisco and
16 adjacent cities and also the Northern California
17 affiliate of the National Congress of National Black
18 Churches, which represent over 25 million churches -- I
19 mean, 25 million members over the nation.
20 We are here in objection to the merger and the
21 resolution to the proposed merger by NationsBank
22 Corporation of Charlotte to acquire Bank of America
23 Corporation of San Francisco.
24 The Pastors and Ministers Congress of San
25 Francisco and adjacent cities, in conjunction with the
26 South Bay branch of the NAACP and the Northern California
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527
1 affiliate of the Congress of National Black Churches,
2 which represent over 500 churches in the Bay Area and
3 active community-based organization, have formed a
4 coalition against a merger and hereby file their concerns
5 on behalf of the neighborhoods about the merger's impact
6 on the banking services to lower income and minority
7 neighborhoods.
8 The federal law, the Community Reinvestment Act
9 of 1977, requires banks to make loans in all
10 neighborhoods in which they have branches. And we're
11 concerned about how Bank of America is closing most of
12 their bank branches in predominant African-American
13 neighborhoods in the area.
14 In addition, I'd like to put a little quote
15 there, too. If you now go to most of Bank of America --
16 especially they've closed down most of them in the
17 predominant African-American neighborhoods in San
18 Francisco however. But if you go into any Bank of
19 America, black males is an endangered species. They
20 don't exist on the windows as tellers.
21 I would hope that you would consider a
22 comprehensive recruiting program that can enable young
23 black males to participate and be workers in the bank.
24 That's one point.
25 The next point is that -- our concerns is
26 that -- we are concerned about the poor community lending
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528
1 records to minorities, especially African-Americans in
2 low-income areas. Federal regulators should look at
3 their records very closely. I'm talking about the bank
4 before the merger.
5 We feel that these giant institutions should
6 expand their loan commitments nationwide in community
7 development loans and other investments, such as
8 assisting worthwhile community service projects. We feel
9 that the bank should expand their small business loans,
10 affordable housing loans, loans to minority contractors,
11 especially African-American contractors, and economic
12 development loans and consumer loans.
13 It is our concern if these two banking
14 institutions are allowed to merge without these detailed
15 guidelines in place as part of this merger, it is our
16 views that these institutions may neglect or abandon this
17 community investment in California, especially in
18 African-American neighborhoods.
19 More important, we are very concerned about
20 these banking institutions' lending policies to
21 African-Americans, high-end policies of
22 African-Americans, especially African-American males as I
23 state.
24 Now let me just take you just a few steps
25 further. We have signed an agreement from the National
26 Congress of National Black Churches with the Justice
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529
1 Department. If you want to see crime go down in our
2 neighborhoods, you can be a player at the table to help
3 us. We have developed a very comprehensive innovative
4 program that we have submitted to the Justice
5 Department. They have accepted our -- a one-year pilot
6 program. And I submit the comprehensive program proposal
7 to NationsBank, to the Federal Reserve Board, to review
8 that proposal.
9 We're working in the school systems. We're
10 taking our churches to work and to the communities, the
11 school, with the police department, social service
12 agencies, et cetera, to put together a comprehensive plan
13 and to help young people stay out of trouble.
14 And another thing that we're trying to do as
15 well, we are trying to put together a proposal to stop
16 jails from filling up. Educate our young peoples, build
17 this nation, build a strong nation. And this is what
18 this should be all about. And this is why we're at this
19 time opposing the merger until such time that some of
20 these things are looked at very carefully and some of
21 these things are put in place so that we can really look
22 at the bank and you can look at America as it grows into
23 the 21st century, all colors, all peoples participating
24 and working.
25 We want that kind of vision and we can -- you
26 can help us make it. And that's why we're here at this
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530
1 time opposing this merger. Because you can be a great
2 player in helping us make this become a reality. Thank
3 you very much.
4 MS. SMITH: Thank you, Dr. Welbon.
5 Mr. Burgis.
6 MR. BURGIS: Yes. My name is John Burgis, and
7 I serve as senior vice president of financial services
8 and chief financial officer for Catholic Healthcare
9 West.
10 Today I represent the concerns and hopes of
11 Catholic Healthcare West and a number of institutional
12 investors, including the general board of pensions of the
13 United Methodist Church, the Presbyterian Church U.S.A.,
14 Christian Brothers Investment Services, the congregation
15 of the Sisters of Charity of the Incarnate Word, and
16 Sisters of Charity Health System. These institutions
17 alone hold over 650,000 shares of NationsBank stock and
18 over 400,000 shares of Bank of America stock.
19 Catholic Healthcare West uses Bank of America
20 for its cash transactions and credit needs. Both the
21 Sisters of Charity and the Sisters of Charity Health Care
22 System use NationsBank for their cash transactions.
23 Let me begin with some background on Catholic
24 Healthcare West's relationships with Bank of America.
25 Catholic Healthcare West is a 3.5 billion dollar health
26 services delivery system with facilities and affiliated
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531
1 physician groups in California, Arizona, and Nevada. As
2 a religiously-sponsored organization, CHW seeks business
3 partners that demonstrate corporate social
4 responsibility.
5 In 1991, CHW began a significant lending and
6 depository relationship with Bank of America, due in
7 large part to the bank's commitment to expanded community
8 reinvestment. During the ensuing years, we have noted
9 and admired Bank of America's efforts to differentiate
10 itself as a leader in corporate social responsibility.
11 Particular accomplishments include focused
12 attention to developing and promoting access to
13 affordable financial services and products, driven by a
14 formal goal to achieve outstanding ratings in every CRA
15 examination; substantial financial commitment to Bank of
16 America Community Development Bank; dedicated and expert
17 leadership devoted to community reinvestment and
18 development; inclusion of environmental and social
19 considerations and criteria for lending to developing
20 economies; development of a strong environmental program,
21 including endorsement of the serious principals for
22 corporate and environmental responsibility and
23 accountability; sustained commitment to diversity in the
24 workplace demonstrated by effective equal employment
25 opportunity and promotion programs, minority purchasing
26 programs, and expanded family benefits programs.
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532
1 Relative to the proposed merger of Bank of
2 America and NationsBank, we urge the new corporation to
3 embrace a comparable, if not enhanced, stance towards
4 corporate responsibility. In our view, the merger
5 presents a singular opportunity to develop an exemplary
6 enterprise that succeeds in the marketplace by becoming
7 the national leader in meeting community needs.
8 In particular, we are concerned that the new
9 corporation commit formally and publicly to meeting the
10 credit needs of every community where it does business,
11 with special attention to low/moderate income clients and
12 persons of color. To that end, we have asked Dr. Lind of
13 CANICCOR to prepare reports assessing both NationsBank
14 and Bank of America's performance in addressing the
15 credit needs of these historically under-served
16 populations.
17 Based on Dr. Lind's assessment, we ask the new
18 corporation to commit to both mortgage lending and small
19 business goals. In mortgage lending, especially on
20 purchased mortgages and home improvement loans, we ask
21 that the new holding corporation seek to achieve, first,
22 performance levels above the industry level in the
23 assessment areas of the banking subsidiaries and lending
24 to black, Hispanic, and low-income borrowers and in
25 lending in low/moderate income tracts and, secondly,
26 performance levels at parity with the industry in all
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533
1 other geographic areas in which the mortgage lending
2 subsidiaries operate in lending to black and Hispanic
3 borrowers.
4 With regard to business lending, we request that
5 the corporation achieve above the industry levels in
6 small business loans, especially first loans of 100,000
7 and under in low/moderate income tracts and, secondly,
8 loans to small businesses in low/moderate income tracts.
9 We believe that these goals would not impair the
10 financial viability of the corporation but would increase
11 the corporation's market. Such goals would provide a
12 firm basis for a further development of these communities
13 and help ensure the corporation against violations of the
14 Equal Credit Opportunity Act.
15 In recent negotiations with a number of
16 corporations, we have been gratified by their readiness
17 to adopt similar goals and are confident that the merged
18 corporation will demonstrate a comparable willingness to
19 implement such goals.
20 We were pleased with the announcement of a
21 community lending commitment of 350 billion over the next
22 ten years for the merged corporation. It is, indeed, the
23 largest commitment announced to any merger so far.
24 We welcome the new corporation's willingness to
25 detailed annual reporting of performance at national,
26 regional, and local levels. We view such reporting as a
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534
1 means to maintain public accountability and as a platform
2 for dialogue.
3 However, we believe that the goals which I
4 outlined above serve a different function from these
5 commitments. Commitments are what can be counted on,
6 while goals detail the benchmarks toward which the
7 corporation aims, thus goals are usually higher than
8 commitments and are more specific. We are particularly
9 concerned that goals be developed to apply to local
10 markets and market sectors.
11 As Dr. Lind points out -- well, I will stop
12 there and simply conclude by saying that, in closing, let
13 me reiterate my advocacy that the new corporation embrace
14 a vigorous stance toward corporate social responsibility
15 and seize the opportunity to develop an exemplary
16 enterprise that succeeds in the marketplace by becoming
17 the national leader in meeting community needs.
18 MS. SMITH: Thank you very much. And next we
19 will hear from Dr. Lind.
20 DR. LIND: Thank you. I'm John Lind, executive
21 director of CANICCOR, an agency of a nonprofit
22 corporation. CANICCOR serves as a consultant to
23 institutional investors on the social responsibility of
24 financial institutions. It provides services in two
25 fashions.
26 First, CANICCOR provides information to funds
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535
1 that have social screens. These include Kinder,
2 Lynderberg & Domini, Calvert, and U.S. Trust. Secondly,
3 CANICCOR provides analysis for and coordination between
4 institutional investors which take an active role with
5 the corporations in which they invest. It is out of this
6 second role that I speak with you today.
7 As you have heard from John Burgis of Catholic
8 Healthcare West, church-related shareholders have sought
9 agreements with a number of major lenders to have goals
10 of lending at or above the industry level to each
11 under-served group and area in which the corporation
12 operates. The industry level is defined as all reporters
13 under the Home Mortgage Disclosure Act.
14 Concerns focus primarily on home purchase loans,
15 home improvement loans, and small business loans. These
16 are products geared towards first-time home buyers,
17 households improving their living conditions, and small
18 businesses seeking to expand or sustain their
19 operations.
20 With regard to home purchase loans for owner
21 occupancy, neither NationsBank nor Bank of America have
22 been near the industry levels in their home areas, let
23 alone in distant areas.
24 Bank of America's performances were outstanding
25 in 1992 with their development of Neighborhood Advantage
26 loans, and these performances were particularly good with
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536
1 low/moderate income minority borrowers. But in the
2 intervening years, the industry overtook Bank of America
3 and its performance levels dropped continuously.
4 However, this decline was retarded by the manufactured
5 housing lending unit. Unfortunately, this unit was sold
6 during the spring of this year, and I have had to
7 eliminate its lending from my analysis to estimate Bank
8 of America's present performance level.
9 To its credit, Bank of America is beginning to
10 design some new products, but it will take time to get
11 these products into the marketplace.
12 NationsBank has performed poorly in its home
13 areas of North Carolina and surrounding states. It has
14 aggressive -- it has an aggressive acquisition program
15 and recently acquired Boatmen's and Barnett banks, both
16 of which perform much better than NationsBank. It
17 remains to be seen whether NationsBank will have learned
18 from its acquisition or whether NationsBank's policies
19 will prevail and cause the lending performances to
20 decline.
21 Let me give you a few numbers to illustrate the
22 problem. In 1996, NationsBank originated 14,092 loans to
23 black borrowers, the most difficult to serve group, in
24 its home territory of North Carolina, South Carolina, and
25 Virginia, 657 loans below the industry level of all Home
26 Mortgage Disclosure Act reporters. If NationsBank were
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537
1 to achieve the industry parity, lending to black
2 borrowers in these states should have increased by 45
3 percent.
4 In 1996, Bank of America issued 396 loans to
5 black borrowers in California, 186 loans below the
6 industry average. To have achieved industry parity in
7 its lending to this sector, lending to black borrowers
8 should have increased by 47 percent.
9 Overall, in 1996, the two corporations performed
10 at 24 to 27 percent below the industry in lending to
11 black borrowers, 12 to 15 percent below the industry in
12 lending to Hispanic borrowers, 14 percent below in
13 lending to low/moderate income borrowers, and seven to 22
14 percent below in lending in low/moderate income tracts.
15 I refer you to my filing for details on home improvement
16 lending and small business lending.
17 Let me summarize by saying that we have had a
18 recent phone conversation with NationsBank and believe
19 that the goals we propose are not foreign to the
20 corporation. However, even if these goals were adopted,
21 the merged corporation faces considerable challenge in
22 developing the necessary structures to attain these goals
23 in the near future.
24 NationsBank -- one, NationsBank and Bank of
25 America have very different corporate cultures which need
26 to cooperate and coordinate. Two, their market areas are
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538
1 very different, high housing price California versus
2 moderate-priced midwest and south. So they will need a
3 diversity of loan products, and those products will have
4 little overlap. And, three, both corporations are coming
5 from relatively poor performance levels in their distinct
6 market areas.
7 These challenges underscore the importance of
8 detailed reporting by loan type and market area on the
9 part of the merged corporation and the necessity of
10 providing a forum for discussion of the performance
11 results.
12 We do not expect miracles overnight, but we hope
13 to see progress according to a planned process. Thank
14 you.
15 MS. SMITH: Thank you very much. Ms. Hizel.
16 MS. HIZEL: Good afternoon. I have the
17 pleasure of representing Youth Enterprises System
18 Incorporated, which, along with its parent organization,
19 Youth Development Incorporated, is one of the largest
20 nonprofit community development corporations in New
21 Mexico. We develop affordable housing, as well as
22 counsel under-served communities primarily comprised of
23 residents with very low, low, and moderate incomes, the
24 majority of which are minority groups such as Hispanic,
25 Native American, and African-American.
26 Youth Enterprises System Incorporated is not
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539
1 opposed to the merger but asks that the Federal Reserve
2 Bank consider these concerns and address any foreseen
3 problems to ensure a successful merger.
4 Currently both NationsBank and Bank of America
5 are active lending institutions in the state of New
6 Mexico, and though NationsBank is a newcomer, some of its
7 employees are long-time banking partners from Boatmen's
8 and Sun West.
9 The impact of the recent Sun West acquisition
10 was fairly smooth because the preliminary transactions in
11 which we were actively involved did not appear to slow or
12 diminish. The residual effect has been, however, less
13 than favorable in that our current transactions are
14 tediously slow and inconsistent. The cause seems to be
15 due to the fact that some of the new loan officers are
16 unfamiliar with our market and transaction types are not
17 properly prepared or informed of our needs. We hope the
18 merger will not displace any bank officers who are
19 familiar with our market and who are intimately familiar
20 with our client and agency obligation. The needs of our
21 communities are unique to New Mexico, as are the needs of
22 communities in say San Francisco or Houston.
23 NationsBank was generous in its debut in New
24 Mexico, and Bank of America has also contributed to our
25 communities via organizations, businesses, and other
26 institutions. We would suggest increased and more
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1 focused bank contributions targeting affordable housing
2 and economic revitalization of older neighborhoods via
3 mini/macro-loan programs, nonprofit neighborhood credit
4 unions, and other new initiatives as necessary given the
5 current economic climate in our community.
6 One of our major concerns is that the two bank
7 personalities will distort one another and cause chaos in
8 the delivery of contributions and bank products. If the
9 cost of the merger is passed through to the
10 organizations, then the communities we serve by reducing
11 contributions and/or minimizing discounted and wavered
12 products, then the people we serve will suffer the
13 burden.
14 Many bank employees from both banks are
15 uncertain of their future. Combine this with the Norwest
16 buy-out of Bank of New Mexico and Wells Fargo buy-out of
17 Norwest and the entire banking community is on its ear in
18 New Mexico. Our organization and others like us are not
19 able to function at full capacity because of the turmoil,
20 because of the lack of fluid transactions, new staff
21 coming, old staff going, and contributions at a
22 standstill.
23 Last year we conducted over $11 million of
24 business not inclusive of our day-to-day banking business
25 in excess of 12 million a year. This calendar year we
26 have not been able to close a single transaction with
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541
1 NationsBank despite the fact that we have nine sites
2 under contract and were scheduled to close one bond
3 transaction on June 30th, 1998. We had commitments from
4 the bonding agency and the rehab granting agency since
5 March and April of '98 respectfully and began discussions
6 on this 4.2 million deal in March of '98. The deadline
7 has now been given as August 15th.
8 We have memorandums of understanding with other
9 major mortgage lenders in our market but have not been
10 able to get one with NationsBank due to the lack of
11 response, nor Bank of America. Again, I believe it is
12 due to the fact that policy changes are occurring,
13 staffing changes are occurring, and employees are
14 entering our marketplace with ideas that may have worked
15 in San Francisco but will never work in New Mexico.
16 Our mortgage and commercial product is important
17 to our constituency and to us, and if this merger slows
18 the delivery of our product, of that product, then our
19 production and growth potential is also diminished. The
20 bank contributions are important to us and, without them,
21 we cannot conduct feasibility analysis and other
22 pre-development duties necessary to commit ourselves to
23 long-term loans and other bank products. Therefore, it
24 is critical that local officers conduct business as usual
25 to ensure the bottom line of the bank and the services of
26 the agencies are fulfilled.
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1 Deals work only if the bank is willing to
2 provide below-market interest rate, fee waivers, and
3 discount portfolio products to our constituency.
4 The new merger is going to add to the existing
5 chaos, and though we are thankful we're not in your
6 shoes, it is important that this merger not diminish our
7 relationship but that it strengthens our relationship and
8 endeavors to build new and innovative ones to ensure our
9 common goals are met.
10 We fear contributions will diminish,
11 below-market interest rates will go away, and New Mexico
12 employees will be replaced by employees unfamiliar with
13 New Mexico communities.
14 The method of the merger is critical to all of
15 us, and we would like to stay abreast of all the changes
16 and expectations as they occur and provide as much
17 assistance as we can during the period to hope that our
18 existing products do not fail or falter. Thank you.
19 MS. SMITH: Thank you very much.
20 MR. FRIERSON: I have a question for
21 Dr. Lind. Could you go into a little more detail about
22 the methodology of the study that you used and address
23 whether the data allowed you to control for income as
24 well as race?
25 DR. LIND: Well, my general methodology is to
26 take the home mortgage data and take the full HMDA report
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543
1 for each MSA and basically scale down that portfolio to
2 the size of the lender in that MSA and then compare the
3 two.
4 And so if the lender -- if the scaled portfolio
5 which is of the same size as the lenders had, you know,
6 65 loans to black borrowers but the lender had only 35
7 loans, then I say that the lender is below the industry
8 by 35 loans. And then I can add those up as I go up to
9 higher levels of geography and corporate levels.
10 And obviously I used the HMDA data in terms of
11 the income that's provided by the HUD income levels for
12 that -- for the given year that are provided by the FFIEC
13 in looking at the income distribution of the borrowers.
14 This is equivalent to the old market fraction
15 rate that was proposed by the OCC back -- by the FFIEC
16 back in December of 1993.
17 MR. FRIERSON: Market share test?
18 DR. LIND: It's basically the market share
19 test, but I've -- actually, Stephen Cross at OCC agreed
20 with me that we're talking the same language. It's just
21 that it's convenient for me to phrase it this way because
22 I can add it up from -- to higher levels, whereas the
23 market share test is really good at the -- just at the
24 MSA level.
25 MS. SMITH: But the income that you use is the
26 demographic information from the Bureau of the Census?
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1 DR. LIND: That's right.
2 MS. SMITH: So that it tells you the income
3 level of given census tracts?
4 DR. LIND: That's right. I buy the FFIEC
5 census tape each year.
6 MS. SMITH: I have a question for Dr. Welbon.
7 You mentioned a pilot -- a one-year pilot program and
8 having submitted a proposal. I wasn't clear. You
9 mentioned the Department of Justice and you mentioned the
10 Federal Reserve.
11 DR. WELBON: That is correct.
12 MS. SMITH: And what exactly is the proposal
13 for?
14 DR. WELBON: We submitted in a very
15 comprehensive proposal that we submitted to the Federal
16 Reserve Bank and NationsBank as dealing with the school
17 systems. We have an initial 1.5 million dollar grant on
18 the national level from the Congress of National Black
19 Churches, which I serve as the Northern California
20 chair. And we are initiating a comprehensive innovative
21 program dealing with young peoples into the school
22 systems, also to make sure that they stay on the right
23 side of the track, and also that we haven't a lot of
24 violence in our school system at this particular time.
25 And we're trying to do something to bring that level
26 down.
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1 And we feel that -- and we feel that what is
2 happening in our school systems, there must be some sort
3 of proper -- reason why it's happening, especially kids
4 shooting one another and shooting our school teachers, et
5 cetera. And we need to try to focus on what can be done
6 to solve that sort of problem. And that's the type of
7 program that we have initiated with the Justice
8 Department and we're working with our school.
9 We put a summits on in San Francisco, also in
10 Oakland. And in the Northern California we're having
11 summits meeting with the teachers of the school, the
12 Justice Department, the social service department. All
13 of those entities are working to establish a network and
14 a joint partnership to order for us put -- to help this
15 comprehensive program at work.
16 I would rather see us take that $35,000 so we
17 incarcerate prisons, put young people in prison, and put
18 it into -- invest it into our young people. Because we
19 have to look at we're investing into our future, our
20 young people. America is on the -- it can be the most
21 beautiful country in the world, but we have to look at
22 the positive side and the negative side and work with
23 both sides to put together this innovative -- and with
24 your help, we can do that.
25 MS. SMITH: But the proposal is for joining in
26 a partnership? Is it for --
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1 DR. WELBON: The proposal has been submitted to
2 First Nationwide if you need to take a look at it, Bank
3 of America --
4 MS. SMITH: Well, I was interested in -- you
5 mentioned the Federal Reserve and I didn't know exactly
6 what role.
7 DR. WELBON: Well, we submitted a copy to the
8 Federal Reserve.
9 MS. SMITH: For our information?
10 DR. WELBON: For your information.
11 MS. SMITH: Okay. I understand.
12 Any other questions? If not, we thank you very
13 much for your testimony this afternoon. Be sure if you
14 have any supplemental comments to submit them by a week
15 from today close of business. Well, 5:00 Eastern
16 Daylight Time. And with that, I guess we're ready for
17 the next panel.
18 MR. PAPAN: It's a good thing I had to make
19 one stop before I got here.
20 In any event, I'd like to thank the Reserve
21 Board for the opportunity of coming to testify with
22 regard to this merger. I, for one, feel that Bank of
23 America is California, and I would feel strongly that
24 what the Bank of America has done in California, it
25 should be part of the merger when it's completed.
26 To make it a little more specific, the Community
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547
1 Development Bank has been a very important part of Bank
2 of America's activities in California. I'd like to see
3 that this merger enhances that same kind of activity
4 after the merger as has occurred prior to the merger.
5 And I think Bank of America could possibly do a lot to
6 implement what they have done in California.
7 The resources that presently are at their
8 disposal, which I have been made to understand is -- the
9 merger will mean a 3.5 billion dollar bank. And if we
10 could have somewhere around eight percent in the
11 activities of the Developmental Community Bank and
12 also Bank of America is known for its work, benevolent
13 work, on the Bank of America Foundation, Bank of
14 America's Rural 2000. Are the three programs that I just
15 cited. I think a concerted effort should be made to
16 continue those on a larger scale after the merger.
17 I have some concerns about the fact that we are
18 seeing the seat of a California -- of Bank of America
19 moving to somewhere else when it is so much a part of our
20 banking scene here in California. Hopefully they are
21 sensitive to the possible idea that there be disruptions
22 with regards to employment. I really believe that a lot
23 of attention should be paid as to how they're going to
24 implement their merger and how it's going to impact the
25 people that are presently working here in California.
26 I personally feel that the resources that the
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548
1 Bank of America has generated here in California support
2 the idea that banks, in general, are nothing more than a
3 clearinghouse for public money. And the sensitivity to
4 that principal or the sensitivity to the idea that banks
5 are a clearinghouse for public money should be
6 implemented in the sense that California should not be
7 hurt by this merger.
8 If there are additional resources to come into
9 California as a result of the merger, I would most
10 appreciate the sensitivity that goes with being the most
11 popular state in the union and a lot of their activities,
12 although their seat of their operations will be somewhere
13 else, that they pay close attention to the fact that we
14 are a lot of people here, and we need a lot of
15 attention.
16 We are, as you all know, the most agricultural
17 state in the union so that Bank of America's Rural 2000
18 is something that the new merger should not change and it
19 should enhance it if -- to a greater degree. Those
20 resources that this merger will bring I feel can help
21 California a great deal.
22 I think our management here has been something
23 that I, for one, being chairman of banking, having met
24 Mr. Coulter and seeing how sensitive he has been to the
25 needs of our people and to the enrichment of banking in
26 California by his chairmanship is something that I think
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549
1 is -- it's my understanding that you're going to
2 alternate the CEO or they're going to alternate the CEO
3 position. And I want to make certain, for one, that if
4 Federal Reserve is going to oversee it that they -- what
5 they made public should be implemented.
6 MS. SMITH: Okay. Thank you very much,
7 Assemblyman Papan, for coming by this afternoon. I know
8 you have a very busy schedule.
9 MR. PAPAN: Well, I was hoping you could give
10 us some money for the budget. But in any event, we have
11 our share of the surplus, so I don't think we need money
12 per se. I do thank you for the opportunity of addressing
13 the panel.
14 MS. SMITH: Thank you very much for coming
15 by.
16 MR. PAPAN: Thank you.
17 MS. SMITH: And with that, we'll go to
18 Mr. Baker.
19 MR. BAKER: Thank you. My name is Joseph
20 Baker, and I'm from the School-to-Career offices of the
21 San Francisco Unified School District. The San Francisco
22 School-to-Career Partnership is an effort by the San
23 Francisco Unified School District, the San Francisco
24 Chamber of Commerce, and City College of San Francisco to
25 combine the knowledge and experience of education,
26 business, and government leaders to better prepare public
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550
1 high school students for their futures as college
2 students, members of the American work force, and
3 beyond.
4 Key aspects of the School-to-Career Partnership
5 include raising educational standards; identifying the
6 skills needed for success in further education and in the
7 workplace and ensuring high aspiration among all
8 students; integrating school and work; linking students'
9 classroom learning with experiences in the workplace and
10 in the community; ensuring students are exposed to a full
11 range of career opportunities, which include internships,
12 job shadowing experiences, internships for teachers, and
13 site tours; evaluating progress and success; setting
14 goals and creating measurement tools to track and assess
15 the School-to-Career Partnership system; and finally
16 system building, connecting and expanding upon existing
17 school, community, government, and corporate programs
18 which serve to educate and prepare San Francisco youth
19 for career successes.
20 The Academy of Business and Finance is a San
21 Francisco School District career pathway which is a
22 component of the San Francisco School-to-Career
23 Partnership. The Academy of Business and Finance
24 currently offers over 1,200 students at seven public high
25 schools with the opportunity to explore careers in
26 business and the financial services industry while
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551
1 developing the skills necessary for success in any
2 career.
3 Students take rigorous academic courses,
4 participate in tours of businesses, work on improving
5 academic skills with a business mentor, work as an
6 intern, and take college courses in their senior year.
7 The key to the success of the Academy of
8 Business and Finance program is a quality community
9 partnership. An active advisory board consisting of
10 business executives, college partners, community
11 representatives, high school teachers, students, and
12 others support and guide the program. Training for
13 teachers, mentors, internships, financial support, and
14 assessment of the programs are all provided by this
15 partnership.
16 The Academy of Business and Finance is a member
17 program of the National Academy Foundation based in New
18 York which has developed a national network of over 500
19 model School-to-Career programs.
20 This program is today at the forefront of the
21 school-to-work movement. It is a focus of and model for
22 educational reform efforts in this community. In San
23 Francisco, of the 18,962 high school students, 42 percent
24 are identified as educationally disadvantaged, 27 percent
25 receive free or reduced lunch, 24 percent are limited or
26 non-English speaking, and over 80 percent are identified
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552
1 as members of minority populations. While the students
2 participating in the Academy of Business and Finance
3 program reflect the same diversity, over 94 percent
4 continue on to college.
5 Bank of America and their support for the
6 School-to-Career programs in San Francisco. Bank of
7 America and Bank of America Foundation have served as key
8 factors in the support of School-to-Career programs
9 nationally and in San Francisco. On a national level,
10 Bank of America's participation on the national employer
11 leadership council and in the development of national
12 skill standards in banking has set a standard of
13 corporate leadership in developing tools to assist
14 educators. Bank of America supported the development of
15 model School-to-Career programs in many communities to
16 promote educational reform and economic development.
17 In San Francisco, Bank of America has a long
18 history of supporting public education. Bank of America
19 currently sponsors paid internships for high school
20 students, scholarships, grants to support program
21 development, and other services that directly impact
22 education and improves the lives of young people involved
23 in San Francisco and School-to-Career programs.
24 Bank of America provides business advisory board
25 leadership for the Academy of Business and Finance.
26 Employees throughout the bank have served as mentors and
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553
1 donated vast amounts of time to help students with such
2 things as resume writing and interviewing skills. Other
3 employees have volunteered as speakers, provided tours,
4 or worked with teachers to improve curriculum.
5 Through our participation in the National
6 Academy Foundation, we have become aware that NationsBank
7 also supports School-to-Career in many communities, which
8 include Dallas, Tampa, St. Louis, Kansas City just to
9 name a few.
10 I must note that Bank of America also was the
11 first to seize upon a recent ruling by the OCC and
12 supported by the Federal Reserve Bank in which student
13 internships were identified as giving a bank Community
14 Reinvestment Act credit, and the bank seized upon this
15 opportunity to increase their support to the San
16 Francisco schools.
17 In conclusion, Bank of America's support for the
18 San Francisco School-to-Career program and the Academy of
19 Business and Finance has had a great and positive impact
20 on thousands of high school students. The
21 School-to-Career office of the San Francisco Unified
22 School District sincerely believes the merger between
23 NationsBank and Bank of America will greatly increase the
24 School-to-Career Partnership's ability to provide quality
25 educational opportunities to San Francisco's young people
26 and will create a more diverse work force for the
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554
1 financial services industry in the 21st century.
2 It is for these reasons that the
3 School-to-Career office of the San Francisco Unified
4 School District wholeheartedly supports a merger between
5 NationsBank and Bank of America. We thank the Federal
6 Reserve Board for the opportunity to express this
7 support.
8 MS. SMITH: Thank you. Ms. McKee.
9 MS. McKEE: Thank you for this opportunity to
10 testify. I am Michele McKee, planner with Community
11 Services Agency Development Corporation, CSADC, in Reno,
12 Nevada. CSADC is a private, nonprofit human services
13 corporation which has been operating in the state of
14 Nevada for 33 years.
15 During the past seven years, CSADC has focused a
16 major portion of its energy in developing affordable
17 housing opportunities for low-income and working poor
18 populations in Nevada. Our housing efforts actually
19 originated with a 10,000-dollar pre-development grant
20 received from Bank of America in 1991. Since that time,
21 CSADC has constructed 11 projects consisting of 801 units
22 of affordable housing and is currently developing an
23 additional 200 units within the state.
24 While our primary focus is on increasing the
25 availability of affordable housing, our secondary focus
26 has been to maintain and improve the quality of life in
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1 communities and neighborhoods in Nevada. Our high
2 quality construction projects are located in desirable
3 areas of town and blend with existing architecture and
4 amenities, making them indistinguishable from market rate
5 apartment complexes in the same neighborhoods. The
6 Builders Association of Northern Nevada recognized one of
7 our most recent developments with their High Standards
8 Award for 1997.
9 While CSADC has developed formal relationships
10 with a number of Nevada financial institutions, the
11 relationship formed with Bank of America has been, by
12 far, the most successful. The Bank of America Community
13 Development Bank provided construction financing on nine
14 of our 11 projects for a total of $26.8 million and
15 provided permanent financing on one project for a total
16 of 1.2 million. CSADC utilizes the Bank of America
17 Community Development Bank financing primarily because of
18 its favorable loan terms and the responsiveness of its
19 knowledgeable and committed staff.
20 Another CSADC project supported by Bank of
21 America has been our first-time home buyer program. In
22 the last four years, CSADC has provided down payment and
23 closing cost assistance to 203 low-income families in
24 Reno purchasing their first home through this program.
25 Bank of America Mortgage has been the most active lending
26 participant in the program, generating 60 of the 203
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556
1 loans or 30 percent of all loans combined. Again, this
2 is due largely to the high level of support and knowledge
3 of our program demonstrated by Bank of America staff, as
4 well as the favorable lending criteria which Bank of
5 America has developed for its affordable loan programs.
6 Bank of America staff were actively involved in
7 the development of our pre-purchase counseling program
8 and donated approximately eight hours per month of staff
9 time to assist CSADC in the actual provision of the
10 counseling. The Bank of America Foundation has also
11 provided administrative support in the amount of $5,000
12 on an annual basis for this program.
13 One of the most recent important initiatives on
14 which CSADC and Bank of America are working is the Bank
15 of America Rural 2000 initiative. Three of CSADC's
16 affordable housing projects mentioned before were
17 developed in rural Nevada, utilizing Bank of America
18 Community Development Bank financing.
19 As you may be aware, due to the small population
20 and cyclical mining economic base of rural Nevada,
21 financing is hard to come by for any type of housing
22 development. In fact, even now approximately 40 percent
23 of all housing in rural Nevada consists of mobile homes.
24 The Bank of America Rural 2000 initiative is
25 designed to expand on the current financing products
26 available in rural areas to include community facilities
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557
1 such as child care centers, capacity building support for
2 nonprofit organizations, development of a community
3 development loan fund servicing rural areas, and support
4 of uses of technology designed to meet rural needs. In
5 order to develop these initiatives, Bank of America Rural
6 2000 included on its advisory board community leaders
7 from all service areas, including CSADC's executive
8 director, Mr. Cloyd Phillips.
9 Bank of America's dedication to rural areas of
10 Nevada is to be commended. CSADC supports the Bank of
11 America and NationsBank merger. Our main concern, in
12 fact, the reason for being here today, is to ensure that
13 the positive programs, products, and services which Bank
14 of America has in place in Nevada are not lost in the
15 process.
16 As a relatively small state in terms of
17 population, we in Nevada have often found ourselves
18 excluded from initiatives presented by both private and
19 public funding sources on a national basis. We would
20 encourage that the Bank of America Community Development
21 Bank, Bank of America Foundation, and staffing support of
22 local initiatives, and the Bank of America Rural 2000
23 initiative be maintained or expanded through this
24 merger. Thank you.
25 MS. SMITH: Thank you very much.
26 Mr. Holderman.
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1 MR. HOLDERMAN: Good afternoon, Chairwoman
2 Smith, board members. My name is Reed Holderman. I'm
3 the western regional director for the Trust Republic
4 Land. The Trust Republic Land is a private, nonprofit
5 land conservation organization that works nationwide to
6 conserve land for people. We were founded in 1972. We
7 specialize in conservation real estate. Over the last 26
8 years, we have helped protect one million acres
9 nationwide for people to enjoy as public open space.
10 We have had an excellent working relationship
11 with Bank of America, and they have established a strong
12 record and responsible approach to a host of critical
13 environmental problems in this state. With the
14 establishment of a dedicated Department of Environmental
15 Affairs, this financial institution has taken on a wide
16 variety of internal and external conservation
17 initiatives.
18 They include, one, their financial and
19 institutional support for "Beyond Sprawl, New Pattern of
20 Growth to Fit the New California," a publication which
21 demonstrates that responsible planning and development
22 and the in-filling of our urban core areas is a
23 mainstream business concern if California is to continue
24 to be a healthy state.
25 Two, their founding support and funding for
26 Californians for the land. This collaborative group of
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559
1 three major California foundations, the Hewlett Packard
2 and James Irvine Foundation and Bank of America, has led
3 to the creation of the California Center for Land
4 Recycling and the Great Valley Center. CCLR, or the
5 California Center for Land Recycling, assists in the
6 cleanup and the reuse of contaminated urban properties
7 for public benefit. The Great Valley Center is concerned
8 with Central Valley's growth and environment and works to
9 create sustainable communities.
10 And, three, the bank's leadership in the
11 California environmental dialogue, a group of business
12 and environmental leaders that work to reach agreements
13 on difficult business and environmental issues such as
14 habitat conservation and air quality. In fact, yesterday
15 in Sacramento, CED held a press conference in which they
16 publicly announced their support for an 880 million
17 dollar proposed bond acting that -- buying parks and open
18 space in California.
19 In addition, Bank of America has worked directly
20 for the environment. We have done business deals with
21 them through the bank that have benefited both California
22 and the bank shareholders. One of our projects was to
23 protect the 14,000-acre Rutherford Ranch in San Diego
24 County.
25 Finally, I just want to say that if this merger
26 is approved, it is our hope that Bank of America's
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1 environmental leadership in California will be felt
2 nationwide. Thank you.
3 MS. SMITH: Thank you very much.
4 Mr. Watkins.
5 MR. WATKINS: Thank you. I feel a little bit
6 like a fish out of water. I'm a second-level
7 subcontractor. And all these distinguished speakers and
8 causes, I'm impressed. But I was asked -- my name is
9 Mark Watkins. I'm a Native American business out of
10 Tulsa, Oklahoma. And I was asked to write a letter
11 expressing -- or stating how NationsBank had helped me.
12 I incorporated in January of '97 and operated
13 out of my house for three employees. Currently we have
14 about 30 employees in a 7,000 square feet building. And
15 through the opportunities that direct support for the
16 minority development people, particularly in Dallas,
17 specifically Diane Kwayar, our business has had the
18 opportunity to grow and we continue to get their
19 support.
20 They have networked us to other major people,
21 companies that do business with them first line. And our
22 business is growing through the network. This Diane
23 Kwayar has introduced me to other first lines that do
24 business with Nations, and our business continues to grow
25 and thrive, and I think it's directly associated with the
26 support of NationsBank.
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561
1 I'm active in a lot of minority groups in
2 Oklahoma, and I've never been to a minority trade show or
3 anything that Nations didn't have a presence. And
4 they've gone out to great lengths to help me directly
5 and our company. And we're now manufacturing some of the
6 bank product thanks to the opportunity through Nations.
7 So we're -- of course, it's a little different
8 level. We're out there, like I say, in the middle of
9 Oklahoma and I'm hearing some big pitchers here. But I
10 haven't had anything but fantastic support from the bank
11 and their people.
12 I feel a little insignificant with my story
13 but -- this is kind of overwhelming for an Okie to be out
14 here in San Francisco, first time anyway, and in front of
15 the Federal Reserve Board. So I'm shaking a little bit.
16 But it's pretty awesome, and so is NationsBank has been,
17 and I'm sure Bank of America is the same. So I have no
18 doubts that it wouldn't be good.
19 MS. SMITH: We appreciate hearing from you and
20 from the middle of Oklahoma.
21 MR. WATKINS: Thank you.
22 MS. SMITH: Ms. Snay.
23 MS. SNAY: Thank you. My name is Abby Snay.
24 I'm the director of Jewish Vocational Service, which is
25 an employment and training organization here in San
26 Francisco working with a very diverse group of
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562
1 individuals in San Francisco, including refugees from the
2 former Soviet Union and Bosnia, adults and youth with
3 disabilities, recent college graduates and adults in
4 transition, homeless individuals, and other individuals
5 making the transition from welfare to work.
6 In the last fiscal year, which just ended on
7 June 30th, our organization placed 1,100 such individuals
8 into employment throughout the Bay Area.
9 I'd like to focus my remarks on Bank of
10 America's community involvement in San Francisco in the
11 realm of welfare to work. And I should tell you that
12 outside of these initiatives, our agency over the last
13 five years has placed over 40 individuals with some kind
14 of barrier to employment within Bank of America.
15 Assisting public assistance recipients to
16 transition off of welfare and into the work force
17 certainly presents one of the major public policy
18 challenges of the decade, and this requires close
19 partnerships among the business, the public, and the
20 nonprofit sector. Bank of America, in my opinion, has
21 begun to carve out a leadership role in corporate efforts
22 to train and employ public assistance recipients.
23 B of A has created positions within the bank to
24 work with community groups and government entities and
25 the Department of Human Services to create training and
26 hiring opportunities for individuals on public
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563
1 assistance. Through the work of Susan Portugal and Karen
2 Shawcross, two managers in welfare-to-work programs, Bank
3 of America is working to identify appropriate positions
4 for such hiring within the bank and then coordinate
5 referrals through community groups. And I'd like to
6 share several examples.
7 We have just completed a four-month training
8 program training refugees in office technologies, and two
9 hiring representatives from Bank of America came to this
10 class to both educate them on the hiring process in
11 general and to talk specifically about hiring
12 opportunities which may be appropriate within the bank.
13 As of today, we have nine of these students in
14 the testing and interview process, with Karen Shawcross
15 serving as an internal advocate within the bank to
16 encourage and facilitate hiring. And I'd like to come
17 back in several weeks and let you know that they have all
18 been hired. And these would be cash handling, security
19 guard, and other administrative positions.
20 Also, we are in negotiations with Bank of
21 America, which approached our organization, to explore
22 two training partnerships for welfare recipients, one to
23 train proof operators and one to train tellers and
24 customer service representatives. Through such
25 partnerships, the bank would provide training resources,
26 space, and instructional staff, as well as hiring
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564
1 opportunities, and support our organization financially
2 to provide the soft skills, training, the work readiness,
3 the appropriate behavior, work attire, what we call the
4 soft skills, case management, and retention support after
5 hiring.
6 Bank of America has also provided funding
7 support to our agency as a corporate sponsor of one of
8 our employees of the year last year at our annual
9 business luncheon. And this was a young woman with
10 severe emotional disabilities who, through employment at
11 the Exploratorium, really transformed from a young woman
12 with such dread and antagonism towards authority into a
13 model employee and someone who is now headed towards
14 premedical study at college. It's really been a great
15 success story.
16 I also know that Bank of America is working with
17 other community-based organizations in similar ways,
18 trying to match hiring needs of trainees and
19 welfare-to-work programs with hiring opportunities within
20 the bank and also, in one example, donating space for
21 training in unused office space that Bank of America
22 has.
23 Although I can only address these narrow aspects
24 of employment and training within this large sphere of
25 the whole merger decision, Bank of America has clearly
26 made a strong commitment to welfare to work and is one of
.
565
1 the largest employers in San Francisco with significant
2 numbers of entry level jobs and has taken a leadership
3 position to provide important employment and training
4 opportunities to San Franciscans. And I would assume and
5 encourage a merged entity to maintain that commitment --
6 I would assume that it would -- to community programs, to
7 hiring individuals coming off of welfare and, perhaps
8 most importantly, to retaining those entry level
9 positions within San Francisco. Thank you.
10 MS. SMITH: Thank you very much.
11 Mr. Friedman.
12 MR. FRIEDMAN: Yes, thank you. My name is
13 Jason Friedman. I'm the vice president and director of
14 economic development for the Institute for Social and
15 Economic Development in Iowa City, Iowa. ISED is a
16 statewide nonprofit agency that helps low-income,
17 unemployed, and underemployed individuals to start small
18 businesses as a way to become economically
19 self-sufficient. ISED also works in economically
20 distressed urban and rural areas, partnering with
21 communities seeking to revitalize their local economies
22 and create new businesses and jobs.
23 The proposed merger between NationsBank and Bank
24 of America has propound significance for my organization
25 and so I'm very pleased to be able to explain why today.
26 ISED is a micro-enterprise development agency.
.
566
1 We provide training in self-employment for Iowans that
2 see small business development as a way to become
3 self-sufficient, provide for their families, and enter
4 the mainstream economy. Over 65 percent of the nearly
5 1,000 Iowans we serve each year are on welfare or have
6 incomes under 150 percent of the federal poverty level.
7 The critical element of our success stems from
8 our relationships with the financial community. We are
9 not a direct lender, so we rely very heavily on financial
10 institutions as one important source of capital to help
11 our clients start small businesses. However, many of our
12 clients fall outside traditional credit guidelines. Over
13 the past ten years, we have been successful in
14 encouraging some banks in Iowa to look at the LMI market
15 as a profitable market for new customers and new business
16 opportunities.
17 However, Iowa, unlike California, North
18 Carolina, New York, Maine, and many other states, does
19 not have a history of community development corporations,
20 community development financial institutions, and other
21 public/private models for revitalizing distressed
22 neighborhoods and creating jobs and businesses in
23 low-income communities. That is not to say that Iowa's
24 financial community is not committed to community
25 development. Rather, we have not yet fully explored the
26 newer approaches to bank-driven public-private
.
567
1 investments in low-income communities.
2 However, in 1997 NationsBank bought Boatmen's
3 Bank, which was based in St. Louis and which had a small
4 presence in Iowa. In many ways, that will be remembered
5 as the beginning of a new era of banking in Iowa. For
6 the first time, a bank came to us and said, quote, "We
7 know what you do and we embrace it. What can we do
8 together to increase business activity, jobs, and
9 investment in the communities that we work in together?"
10 Needless to say, that was a breath of fresh air
11 for us. And we didn't need to convince NationsBank that
12 serving the LMI market made good business sense. They
13 were already doing it. In fact, one of the first things
14 they did when the bank took over was to establish a
15 branch in the inner city of Des Moines, the capital city.
16 Last summer, NationsBank Iowa made a major
17 investment in ISED to help subsidize the cost of our
18 business training programs in both urban and rural areas.
19 Today, Al Gross, the bank's vice president for community
20 investment, serves on our advisory council in Des Moines,
21 and Al and I are now exploring ways to strengthen and
22 grow our business relationship in ways that achieve our
23 mutual goals.
24 Honestly, the attention we're getting from
25 NationsBank is great and the investment is very much
26 appreciated, but the bottom line is that Iowa now has a
.
568
1 major financial institution that views the health and
2 growth of inner city markets as a major focus and
3 opportunity. And we are proud to be a partner with
4 NationsBank in fulfilling those objectives.
5 The proposed merger between Nations and Bank of
6 America will only serve to strengthen and expand that
7 commitment. The new bank will provide a remarkable depth
8 and breadth of products and services to rebuilding
9 neighborhoods and increasing economic opportunity. We
10 look forward to welcoming the new bank and the
11 opportunities it will provide to widen the circle of
12 economic opportunity for all Iowans. Thank you.
13 MS. SMITH: Thank you. Questions? We don't
14 seem to have any questions for you, but we thank you very
15 much for coming and appreciate having your testimony.
16 Thank you all.
17
18
19
20
21
22
23
24
25
26
.
569
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
570
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
571
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.
572
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
573
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
574
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
575
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
576
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
577
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
578
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
579
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
580
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.
581
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
582
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
583
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
584
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
585
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.
586
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
587
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
588
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.
10 (Pause in proceedings.)
11 MS. SMITH: We'll start with Mr. Lee.
12 MR. LEE: Thank you. I am executive director
13 of the Chinese American Voters Education Committee, a
14 nonprofit, nonpartisan Asian American grass roots voter
15 registration education organization in San Francisco,
16 which operates throughout the Bay Area in immigrant
17 communities educating new communities about voter
18 registration and civic participation. We have been in
19 existence since 1976.
20 Our relationship with Bank of America began
21 over a decade ago when our local bank representative,
22 Irene D. Riley, then manager of the Chinatwon branch,
23 became one of the first supporters of voter
24 registration. Irene and the bank have supported us
25 generously every year since.
26 In 1995, Bank of America and the Asian
589
1 Business Association were the first to support our most
2 ambitious effort to reach new citizens through the first
3 coordinated bilingual print, television, radio, public
4 service campaign to encourage voter registration
5 participation amongst the new immigrant community, some
6 of them the most under-represented communities in the
7 Bay Area.
8 We developed and designed a public relations
9 campaign, I brought along a poster. Sort of like this
10 (indicating), in Chinese and English. This one campaign
11 alone over the last three years has helped us register
12 over 50,000 Asian American voters in the San Francisco
13 Bay Area, a phenomenal increase in terms of voter
14 registration for a new counter-community. We went from,
15 in 1991, from 13 percent of the registered voters in San
16 Francisco to, as of 1996, some 18 percent of the city's
17 registered voters, a phenomenal increase.
18 This would not have been possible without the
19 support of Bank of America, Irene and many of the
20 dedicated people that we work with at the bank. More
21 recently, we worked with Irene to develop a pole for
22 Chinese American voters in San Francisco to help better
23 understand the issues that were of interest to the
24 community.
25 Last year we -- last month we executed the
26 pole, and, for the first time, developed a comprehensive
590
1 plan as to what were the top priorities within our
2 community and Bank of America has led, in terms of its
3 support, in disseminating the results of the pole to
4 nonprofit groups, elected officials and other people in
5 positions of public policy.
6 We have been told by Bank of America and by
7 Irene E. Riley and others that this merger is good for
8 the health of the bank and that investment in the
9 community, charitable contributions, will increase and
10 not decrease with the merger, therefore, we are
11 supportive of the merger.
12 MS. SMITH: Thank you very much. Ms. Garcia.
13 MS. GARCIA: Good afternoon. I'm Donna
14 Garcia. I am the Executive Director of the Community
15 Housing Services located in Wichita, Kansas. My
16 organization is a chartered member of the National
17 Neighborhood Networks, which consists of 181 local work
18 -- local groups working throughout the United States at
19 the grass roots level improving housing standards and
20 promoting affordable housing.
21 We are a relatively new nonprofit, having
22 been formed less than three years ago. At the time that
23 we started, NationsBank stepped forward and provided us
24 with funding for development, not an easy risk to take
25 for an organization with no track record at all. They
26 recognized and made a commitment to the low and moderate
591
1 income residents of our community.
2 Since that time, we have continued to receive
3 both strong and consistent support financially and, more
4 importantly, perhaps, from NationsBank employees and
5 they serve on our board and on committees in several
6 different capacities.
7 We work to revitalize the lower-income
8 neighborhoods in Wichita, and we try to create healthy
9 communities by working with residents, business people,
10 government officials and other partners. These
11 partnerships join together and rehabilitate housing and
12 do provide home ownership opportunities for the low to
13 moderate income residents of our area.
14 We also identify and assist in the
15 development of resident leaders. We try to encourage
16 residents to work together and improve both the
17 appearance and the safety of their neighborhoods.
18 We collaborate with other organizations to
19 solve problems and improve the quality of life.
20 NationsBank has assisted us greatly, however,
21 by allowing us to channel local loan capital, mostly
22 through conventional lending forms, to lower income
23 communities. NationsBank has provided specialized loan
24 products that lower the down payment and the closing
25 costs and they have enabled us to assist home buyers in
26 purchasing their home.
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1 They've also continued to provide operating
2 capital to our organization. This enables us to do
3 planning, outreach, marketing and counseling. These are
4 the first and the most critical steps in creating new
5 housing opportunities in our community.
6 In our community there is a significantly
7 underserved population located in the northeast area of
8 Wichita. NationsBank has led the redevelopment of that
9 area by opening a new branch in the heart of that
10 community. It resulted in nearly three-quarters of a
11 mile of new economic development in the area including
12 the fact that the City of Wichita has now gone in and
13 redone the streets in that area also.
14 Community Housing Services welcomes the
15 merger of NationsBank and Bank of America and truly
16 believes that it will lead to a significant expansion of
17 their investment in the distressed communities in
18 Wichita. CHS anticipates being able to maintain the
19 excellent relationship it has with this local partner
20 and appreciates the potential strength and support which
21 should result from a stronger national partner. A
22 national community bank development program can only
23 better the low and moderate income residents of our
24 area.
25 Thank you.
26 MS. SMITH: Yes, Ms. Fentress, you're next.
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1 MS. FENTRESS: Good afternoon, my name is
2 Marvalette Fentress. I am the Executive Director of the
3 Third Ward Redevelopment Council in Houston, Texas. The
4 Third Ward Redevelopment Council, or TWRC, is a
5 community-based umbrella organization representing over
6 40 different organizations and institutions within the
7 greater Third Ward. We represent an area of
8 approximately 35,000 people, 12 different neighborhoods,
9 the majority of which are low and moderate income
10 families.
11 I am here today representing our organization
12 and the fact that we have six community development
13 corporations that work under our umbrella, and they are
14 intricately involved with the provision of affordable
15 housing and economic development opportunities within
16 that area.
17 I am here to support the merger between
18 NationsBank and Bank of America and speak specifically
19 on the relationship that we have been able to develop
20 over the last six years with both NationsBank and Bank
21 of America. They have basically supported several of
22 our initiatives to provide affordable housing and
23 business development opportunities in that area, and
24 they've served even in a greater capacity, not just as
25 a lending institution, but as a community partner and a
26 stakeholder in many of the things that we have tried to
594
1 undertake in that underserved part of Houston.
2 We support the merger because of the 350
3 billion, of course, increased lending opportunities
4 within that area, but we also support it for several
5 other related initives that the new bank proposes. One
6 of them in particular is the community development
7 intermediary financing that the merger will basically
8 impact.
9 We have, as I stated, six community
10 development organizations and many of them are in their
11 formative years, which means they are really struggling
12 in need of financial as well as technical assistance,
13 and NationsBank and Bank of America have proved
14 themselves to be supportive of these institutions. By
15 funding these intermediaries, we basically help to get
16 the financial and technical assistance to these
17 organizations directly.
18 Secondly, the Special Purpose Lending
19 Initiative, where NationsBank and Bank of America
20 basically realized the significance of supporting these
21 other types of institutions, religious institutions,
22 community-based organizations such as ours.
23 We are not involved directly with the bricks
24 and mortar of development. We are a planning and
25 coordinating organization. We help to facilitate the
26 development of these projects and NationsBank has
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1 realized our significant contribution to actually making
2 a project happen, and we're very grateful for that.
3 We support NationsBank because of the
4 tremendous relationship that we've already experienced
5 with them and we think that past performance is probably
6 the greatest indicator of future performance, and they
7 have performed in an exemplary fashion with basically
8 our organization from inception. They serve on our
9 board of directors, every initiative that we undertake
10 they have been right there in the forefront as community
11 leaders and stakeholders.
12 So we urge you to support this merger, not
13 delay it in any way, because we feel that even a day's
14 delay in this merger in making those funds available to
15 these much needed communities could result in years
16 delay of low and moderate income family and realizing
17 their dream of home ownership and small business and
18 entrepreneur's realizing his dream of business.
19 I want to thank you for the opportunity to
20 speak to you.
21 MS. SMITH: Thank you. Any questions? No
22 questions, so we thank you very much for coming this
23 afternoon. Just a reminder, if you have any
24 supplemental comments, they will be due by a week from
25 today.
26 (Pause in proceedings.)
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1 MS. SMITH: Ms. Scott will be a panel of one.
2 MS. SCOTT: Thank you. I hadn't anticipated
3 that.
4 Good afternoon. My name the Lue Venia Scott
5 and I'm a program manager in the Oakland office of the
6 California Community Economic Development Association of
7 CCEDA. My testimony today is on behalf of CCEDA and our
8 Executive Director, Ralph Lippman
9 CCEDA is a statewide membership association
10 of community-based organizations that are actively
11 engaged in the revitalization of California's low-income
12 neighborhoods. In their respective communities, CCEDA
13 members produce results in many areas of community
14 building, including, but not limited to the production
15 of housing, industrial and commercial space, employment
16 training, job creation, business startup and expansion
17 and the provision or facilitation of human services.
18 State associations provide clearinghouses for
19 information and action. To build the capacity and
20 expand the resources for community-based organizations,
21 30 state associations advocate on behalf of the nation's
22 2,200 CDCs.
23 Critical partners are banks like NationsBank
24 and the Bank of America. Forty-eight percent of the
25 nation's community development corporations reported the
26 receipt of more than $50,000 in grants, investments or
597
1 loans in a National Congress of Community Economic
2 Development study, which was published in 1993, called
3 "Against All Odds." This amount has substantially
4 increased over the last five years as deal structure
5 changed, subsidies shrunk and our members grew more
6 financially sophisticated.
7 State associations and CDCs are very
8 concerned that mergers may result in the attenuation of
9 partnerships with banks for community economic
10 development projects. In this time of devolution and
11 consolidation of resources at the state level, any
12 decline is a serious concern.
13 We have found that local groups and state
14 associations have a much more difficult time negotiating
15 support from their banks following a merger.
16 This is particularly underscored today. The
17 Bank of America, its foundation and Community
18 Development Bank have been unflagging partners of the
19 work of in CCEDA and its members.
20 Jim, Wagele, Susan Howard, Don Mulland and
21 Mike Mantle have been responsive and supportive.
22 The rural initiative and the economic
23 initiative are national models. To be at this juncture
24 in the merger and still have uncertainty in the absence
25 of written commitment about the organizational fate of
26 the Community Development Bank, the initiatives and the
598
1 foundationss targeting is, in our view, unacceptable.
2 California deserves better.
3 We believe that CD Bank has acquired
4 considerable knowledge and expertise regarding
5 development in California. We would like to see it stay
6 here.
7 We note the integral role the foundation has
8 played in the operation of California's community-based
9 groups. A percentage of the bank's earnings would
10 ideally be earmarked for California's communities with
11 the decision-making group that is close to the ground in
12 the west, not the southeast.
13 We would like to see an established target
14 goal that would help us to back into conclusions
15 regarding how far the new initiatives will go.
16 Finally, the nations state CDC associations
17 want a firm commitment from banks that are merging to
18 work with their state associations. We want every
19 financial institution to recognize that policy advocacy
20 and training are important to the viability of community
21 economic development.
22 We suggest that merging institutions invest a
23 portion of their resources to support the work of state
24 CDC associations. An alternative approach beyond a
25 direct multi-year commitment to CCEDA and groups like us
26 such as housed in California could be for the banks to
599
1 utilize the National Congress for Community Economic
2 development as an intermediary which would serve as the
3 granting entity and then distribute funding to
4 affiliated state groups in which the newly-merged entity
5 would do business.
6 We believe that banks understand that a rich
7 and vibrant environment is good for the community and
8 for business. We believe that they understand that
9 public policy is moving to the states. We urge a
10 written commitment to support California and state
11 associations. Thank you.
12 MS. SMITH: Thank you very much. Any
13 questions?
14 Thank you very much for coming this
15 afternoon.
16 We have gotten ahead of schedule. So, to
17 make up for all the breaks we didn't have yesterday,
18 we're going to take a one-hour break now.
19 (Recess taken.)
20
21
22
23
24
25
26
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1 MS. SMITH: All right, we are reconvened. This
2 is Panel 28, and we're going to start with Mr. Lawhorne.
3 MR. LAWHORNE: Good afternoon. I am Don Lawhorne,
4 President and CEO of MESBIC Ventures Holding Company, I'm
5 also cofounder and managing director of Pacesetter Growth
6 Fund. These two funds exist in Dallas, Texas to provide
7 equity capital to promising competitive minority-owned
8 firms.
9 In light of time restraints, I have submitted my
10 remarks in writing at my entry to the panel.
11 The strategic and economic realities for the
12 proposed merger of NationsBank and Bank of America are
13 being triggered by global market pressures and perhaps
14 more importantly today's fast growing digital economy. It
15 is well-known today that our nation has entered a new
16 industrial revolution where technology will change how we
17 work, how we shop and how we handle use finance.
18 The digital economy will further fuel consumer
19 expectations for excellent services and competitive
20 products. This will require competitive and extraordinary
21 capacity for the nation's banking system.
22 I am here to support NationsBank/Bank of America
23 merger because it will provide access to larger amounts of
24 equity capital for the nation's most underserved equity
25 market, that is firms owned and led by minority
26 entrepreneurs.
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1 NationsBank Texas came into being as a result of
2 an acquisition, one of the state's largest financial
3 institutions. In 1992, it announced an unprecedented goal
4 to provide 10 billion over ten years for community
5 development investing and lending.
6 At the same time, NationsBank selected our firm,
7 MESBIC Ventures, as a national benchmark for providing
8 equity financing and management assistance to create
9 competitive small businesses owned and managed by minority
10 entrepreneurs. After much due diligence, we received an
11 equity commitment of $2 million and had the personal
12 endorsement of Ken Lewis, president of NationsBank.
13 Cathie Bessant, chief investment officer in the Texas
14 executive team. The initial commitment went beyond
15 dollars, they took an active role in our fund by serving
16 on the board of directors, which included Deborah Cannon,
17 a local executive vice president for Nations.
18 NationsBank's financial commitment did not end
19 with just this initial investment. They subsequently, in
20 1997, made a $5 million investment in our second fund,
21 Pacesetter, making it the single largest limited partner.
22 Again, Ken Lewis and the executive team in Texas, Tim
23 Arnoult and Deborah Cannon made this possible.
24 Because of NationsBank's leadership, vision, and
25 unwaivering commitment to our underserved niche, we have
26 provided over $100 million of equity type financing to
.
602
1 over 100 minority-owned firms throughout the southwest,
2 particularly Texas and California.
3 Let me illustrate just how important this market
4 is. Several years ago, the Small Business Administration
5 was contacted by the auto makers who had an unusual and
6 unexpected problem. They said by the year 2000 unless --
7 their smallest supplier had to have sales between two and
8 300 million a year. That would not happen, as it turned
9 out, from minority-owned companies. They would not make
10 the cut. As they studied it further, it was revealed that
11 the reason they wouldn't make the cut is the capital
12 wasn't available to build larger competitive firms. As a
13 result of this, there was numerous efforts done,
14 particularly by Congress leaders, Congressional leaders
15 such as Maxine Waters here in California, along with
16 Esteban Torres here in California and Bill Jefferson in
17 Louisiana, there was an attempt made by them and others to
18 facilitate getting capital to the underserved market.
19 Since 1993, there's been an estimated hundred
20 billion dollars placed in private equity partnerships here
21 in the U.S. The good news is that sounds like plenty of
22 capital. The bad news is less than one percent of that
23 capital went to funds focused on providing equity capital
24 to build larger, more competitive firms owned and led by
25 minority entrepreneurs. Banks play a major part in these
26 partnerships throughout the country.
.
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1 This merger will help address this horribly
2 underserved market. Again, I speak from experience.
3 NationsBank has 20/20 vision when it comes to serving its
4 markets. As I mentioned earlier, barely five years ago
5 they made a $10 billion commitment including low-income
6 housing, small business lending and equity investing to
7 build larger firms in our various communities. The
8 NationsBank/Bank of America pledge for 10 billion -- 350
9 billion over ten years is unprecedented and it will make a
10 difference for that niche.
11 I also want to say a few words about Bank of
12 America. They, too, are a shareholder and I have the
13 personal experience of working with the person to my left
14 who I did not know would be here, Peter Thompson, he has a
15 fund like ours and I wanted to acknowledge that Bank
16 One -- Bank of America helped us as well as has helped
17 Peter. And between the two of us, we felt we create some
18 of the nation's largest minority firms.
19 I submit to you my testimony in writing and urge
20 the support for this merger. Thank you very much.
21 MS. SMITH: Thank you. And we'll go next to
22 Ms. Garland.
23 MS. GARLAND: Good afternoon, my name is Ruth
24 Garland-Dewson. I came here more or less on a personal
25 note. When I read in the Chronicle this morning what was
26 going on down here, I felt I got to go down there and
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604
1 speak for Bank of America. I own Mrs. Dewson's Hats on
2 Fillmore Street and I've been a partner with Bank of
3 America for some 27 years.
4 When the stock market took a dive, I took a dive
5 recently. I went to Bank of America and I tried to get a
6 loan in the traditional manner and I just couldn't get it.
7 So I wrote Mr. David Coulter and I said, "David, my name
8 is Ruth Dewson --" Mr. Coulter, I didn't dare call him
9 David at the time, now I can. I said, "Mr. Coulter I
10 really need this loan, you're obligated to take care of
11 me. I've been with you for 27 years and I really need a
12 loan. And Mr. Coulter took care of that matter.
13 And in each phase of my growth, Bank of America
14 has always been there to support me. I've gone from point
15 A to top ten. Last year I gained national prominence and
16 again I went to Bank of America. They are my partners,
17 they've come through for me, and whether they should merge
18 or not, I don't know. But I know about their credibility
19 and I'm here to tell you that Bank of America is my friend
20 and I know they're going to do the right thing wherever
21 they are.
22 MS. SMITH: Thank you very much. Mr. Funk.
23 MR. FUNK: My name is Joseph Funk, I'm here
24 speaking for Victor Weisser who is President of the
25 California Council for Environmental and Economic Balance.
26 He's asked that I read this letter into the record today.
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1 It's addressed to Ms. Joy Hoffman, Community Affairs
2 Officer of the Federal Reserve Bank of San Francisco.
3 Dear Ms. Hoffman, The California Council for
4 Environmental and Economic Balance, CCEEB, is a coalition
5 of California business, labor and public leaders
6 established in 1975 by the late former Governor Edmund G.
7 "Pat" Brown to collaborate on creative approaches to
8 achieve both our environmental and economic goals. We
9 focus on issues such as job creation and economic
10 development, regulatory reform, environmental protection,
11 infrastructure investment and fiscal reform.
12 Everyone should be aware of Bank of America's
13 exemplary internal efforts to lower their own corporate
14 environmental operational impacts. But perhaps what is
15 less well-known is the commitment and leadership the bank
16 has shown in helping Caliornia face up to the broader
17 environmental public policy challenges confronting us.
18 Their landmark efforts in crafting workable proposed
19 solutions to California's most intractable issues, such as
20 land use and sprawl, water and habitat conservation, are
21 nothing less than remarkable.
22 For several years we have worked with Bank of
23 America to help bridge the gap between the environmental
24 and business communities. In these efforts Bank of
25 America has repeatedly demonstrated their commitment and
26 skills in building collaboration between historically
.
606
1 adversarial interests. We are proud to have a good
2 working relationship with Bank of America and share the
3 same values. In fact, CCEEB gave special recognition to
4 Bank of America in 1995 by presenting our prestigious
5 Edmund G. "Pat" Brown award to Richard M. Rosenberg, Bank
6 of America's former chairman and CEO, for exemplifying the
7 spirit of environmental and economic balance.
8 Currently, we're pleased that Bank of America's
9 environmental program is actively participating in the
10 California Environmental Dialogue, CED, a collaboration
11 between environmental business and government leaders
12 working to find common ground and workable solutions to
13 thorny challenges in such areas as cost effectively
14 reducing mobile sources of air pollution and demonstrating
15 the linkage between habitat protection and sustainable
16 economic growth. Leaning heavily on Bank of America's
17 past experience and collaboration, we have seen the CED
18 members move from conflict to dialogue to actionable
19 solutions. The bank's leadership role in this work has
20 been key in making the CED successful.
21 We fully expect the merged Bank of America
22 Corporation to continue working in California on our
23 established bridge between the business, government and
24 environmental communities. In fact, I would anticipate an
25 expansion and export of these efforts to other areas as
26 the merged Bank of America Corporation pursues new
.
607
1 national partnerships between various stake holders in our
2 environment and economy. I see this merger as an
3 opportunity to leverage Bank of America's leadership role
4 on a national scale and in more geographic locations.
5 CCEEB looks forward to a continued relationship
6 with the new merged Bank of America Corporation.
7 Sincerely, Victor Weisser, President.
8 MS. SMITH: Thank you very much. We'll go next
9 to Mr. Alcasas.
10 MR. ALCASAS: Good afternoon, my name is Gerald
11 Alcasas, I'm the Executive Director for the Nevada
12 Microenterprise Initiative. I appreciate the opportunity
13 to inform this distinguished panel and/or other interested
14 parties by means of personal testimonial on the subject of
15 the proposed merger. Upon completion of this testimony,
16 it is my intention that there is understanding of the past
17 involvement and commitment Bank of America has provided to
18 Microenterprise in Nevada.
19 The Nevada Microenterprise Initiative is a
20 statewide microenterprise organization. In our capacity
21 as a nonprofit organization, we aim to help low- and
22 moderate-income individuals achieve economic
23 self-sufficiency through entrepreneurialship. NMI offers
24 entrepreneurial training, technical assistance and
25 microloans to develop the entrepreneurial skills of our
26 clients.
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608
1 Our training classes focus on what to consider
2 when starting a business as well as the development of a
3 sound business plan. Topics include determining your
4 market, cash flow, bookkeeping and financing your
5 business. We believe this training is key to the success
6 of our clients who, in most cases, have little or no
7 business experience.
8 Our Microloan fund was established in 1993 to
9 fill a gap in access to credit for individuals wishing to
10 start or expand a business. Our clients typically have
11 small loan requests, poor credit or poor or no job history
12 and little, if any, business experience which makes them,
13 in other terms, unbankable. With our nontraditional
14 financing, a client can access up to $7500 for a start-up
15 loan and $25,000 for expansion. Our successfulness in
16 this risky lending is based on our technical assistance
17 programs. We work one-on-one with our clients to assist
18 them with any concerns or challenges they may encounter.
19 This support is critical and crucial to the success of a
20 business and repayment of a loan.
21 Since the creation of the Microloan fund in 1993,
22 Bank of America has played a key role in the establishment
23 and continuation of the program. BankAmerica Foundation
24 was the second contributor to help establish the Microloan
25 fund by giving $15,000. The following year the Bank of
26 America established a $100,000 Micro/MBEWEBE program
.
609
1 exclusively for the Nevada Microenterprise Initiative
2 participants. Those who utilized this opportunity are now
3 very successful in their businesses. In 1995, Bank of
4 America matched various programs with grants in the amount
5 of $85,000 and recently committed to 15,000 for NMI
6 operations.
7 Bank of America has also supported NMI through
8 its participation of its employees, opened a second branch
9 in Las Vegas in 1995. Bank of America staff served as
10 founding board members and were instrumental in the
11 creation of the Las Vegas office. Other employees offered
12 assistance to the Nevada Microenterprise Initiative over
13 the years.
14 For the past two years, Ms. Joselyn Cousins,
15 Community Development Officer and who runs the Community
16 Development Department, serves as the president of our
17 board of directors and previously she was on our Loan
18 Review Committee. Her time and dedication to the
19 organization has created many opportunities for our
20 organization. Ms. Cousins has helped to establish a
21 referral system between our organization and Bank of
22 America. Funds have been set aside for individuals who
23 bank with Bank of America and who are unable to be
24 assisted with their lending needs at that time. Those
25 clients are then referred to our training program, they
26 fine-tune their plans, hopefully they become successful
.
610
1 and eventually become Bank of America clients once again.
2 As you can see, Bank of America has shown real
3 commitment to the community through its extensive support
4 of the Nevada Microenterprise Initiative. Therefore, we
5 support the merger between Bank of America and
6 NationsBank. Thank you.
7 MS. SMITH: Thank you very much. Mr. Thompson.
8 MR. THOMPSON: Thank you. My name is Peter
9 Thompson and I'm President of Opportunity Capital
10 Corporation and also managing partner of Opportunity
11 Capital Partners. Our companies, similar to Don's, are
12 private equity firms that provide financing to
13 minority-owned companies. And I would just like to take a
14 few minutes to share a few comments with you.
15 Regarding our company's relationship with the
16 bank, a relationship that is noteworthy, in part, because
17 it spans a time period of more than 25 years. And it's a
18 relationship that started back in 1971 when the BofA made
19 its first investment in Opportunity Capital. The
20 investment at that time was critical, not only because of
21 the capital that it provided, but also because other Bay
22 Area companies seemed to regard the bank as a leader in
23 the minority economic development arena and seemed
24 inclined to follow the bank's lead and the bank's example.
25 Ten years later, in 1981, the bank made its
26 second investment and, again, as was the case in 1971, we
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611
1 were able to leverage the bank's involvement with
2 additional investments from other Bay Area companies.
3 Fortunately for us, not only did the bank provide capital
4 and serve as a pacesetter, of sorts, but the bank also
5 invested time in providing guidance in the form of making
6 available to us on a consistent basis senior executives
7 who served as members of our boards of directors and as
8 members of our various advisory committees.
9 This capital and this guidance, as provided by
10 the bank, assisted us in successfully providing capital to
11 a sizable number of minority-owned companies and allowed
12 us to become successful in producing what the investment
13 community, I think, would regard as both respectable and
14 competitive investment results.
15 Rolling the tape on a fast-forward basis over
16 from 1981 to 1992, we realized at that point that the size
17 and shape of our marketplace had evolved to a point where
18 we needed to raise a substantially larger pool of capital
19 in order to remain responsive to the growing needs of our
20 target marketplace.
21 As a consequence, we went back to the bank for a
22 third time, we made a proposal and fortunately the bank
23 responded. And the bank responded with a capital
24 commitment of $15 million. Now, a commitment which we
25 believe was at the time the largest single corporate
26 commitment of capital to a single minority focused venture
.
612
1 capital company. And the commitment was for us doubly
2 important because it played a key role in our success in
3 obtaining a similar matching $15 million commitment from a
4 funding source based in Connecticut.
5 The result of these two excursions into the
6 capital market was that we were able to increase our
7 capital base to about $35 million. And those funds were
8 used to provide capital to companies and industries
9 ranging from health care to broadcasting to manufacturing
10 and companies that have provided employment to, oh, more
11 than 2,000 people and companies that have a current
12 combined gross market value of probably over $700 million.
13 Of course, you know, we are proud of these
14 results. But, as importantly, I think it's key to note
15 that accomplishing those results would have been very
16 difficult, if not impossible, had it not been for the
17 continuing willingness of the the bank to provide not only
18 capital but also time over a time period again which spans
19 more than two and a half decades.
20 So just in closing, I'll just say that I
21 appreciate the opportunity to make these comments, and I
22 would be pleased to further discuss them with you at any
23 point. Thanks a lot.
24 MS. SMITH: Thank you very much. Is that Acree?
25 MR. ACREE: Acree.
26 MS. SMITH: Acree. Mr. Acree.
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1 MR. MAN: I'm Stephen Acree, the director of
2 Community Development in the City of St. Louis.
3 In 1997, NationsBank acquired Boatmen's Bank
4 which was the oldest and largest banking institution in
5 St. Louis. And Boatmen's had been a leader in the
6 community development field in St. Louis, they had a
7 reputation for pushing the envelope for worthwhile
8 projects. And certainly we in St. Louis at that time were
9 concerned that this very proactive stance would be altered
10 with the NationsBank merger with Boatmen's Bank.
11 In fact, however, NationsBank has assumed a
12 tremendous leadership role in the community particularly
13 in our downtown. Not only has Nations fulfilled the
14 commitment made by Boatmen's but they have brought
15 tremendous additional resources to our community.
16 In the year that NationsBank has been actively
17 involved in St. Louis, it has invested $2.1 million in the
18 St. Louis Equity Fund to provide equity to small housing
19 developers for the creation of low- and moderate-income
20 housing. NationsBank has partnered with my agency in a
21 number of housing developments, including McCormack House,
22 a 100 unit supportive housing development for the elderly
23 where NationsBank provided $6.4 million in low-income
24 housing tax credit equity in affordable housing assistance
25 program contribution dollars.
26 NationsBank also contributed $100,000 to the
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1 day-care center at Murphy Park which is a leading edge
2 mixed-income development of a large public housing site in
3 St. Louis. NationsBank also helped to raise $2.4 million
4 in equity for this project.
5 Nations provided 2.5 million in low-income
6 housing tax credit equity for the Etzel Place Apartments
7 which is a 42 unit affordable housing development. And
8 they provided the construction loan and the equity through
9 purchase of tax credits for Parkview Gardens, a
10 not-for-profit development of the Parkview Gardens
11 Neighborhood Association who originally began their
12 efforts under the predecessor Boatmen's Bank.
13 There are a number of very exciting projects that
14 can be accomplished in St. Louis now exclusively because
15 of the addition financial resources and financing tools
16 brought to the community by NationsBank.
17 NationsBank Community Development Corporation is
18 undertaking the $5.3 million acquisition and
19 rehabilitation of an eight story 60,000 square foot
20 warehouse building in our Downtown Loft District. The
21 building is being converted to 26 affordable loft
22 apartments with a first floor art gallery and studio
23 space. The bank CDC will own the project long term in
24 partnership with a local nonprofit, the Regional Housing
25 and Community Development Alliance. NationsBank CDC
26 invested cash equity and purchased the state and federal
.
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1 low-income housing tax credits and the historic rehab tax
2 credits. They will provide the construction financing, a
3 bridge loan and permanent financing, as well. This
4 project does not work financially as a mixed-income
5 development without the NationsBank CDC's ability to
6 invest patient capital. NationsBank is essentially
7 funding 100 percent of the debt and equity for this
8 project, as well as taking a long-term ownership position.
9 They're also pursuing the redevelopment of a
10 140,000 square foot historic warehouse with 42 apartments
11 again in partnership with a not-for-profit Regional
12 Housing and Community Development Alliance. This $9
13 million project will commence in the third quarter of this
14 year. And in the short-term, NationsBank is providing
15 $200,000 to replace the roof and stabilize the building.
16 Our partnership with NationsBank is helping us to
17 create a mixed-income and vibrant residential presence in
18 our downtown that is absolutely critical to re-energize
19 and spur the redevelopment of that area. Their projects
20 and their commitment serve as a catalyst to encourage
21 other corporations and institutions to invest in downtown
22 St. Louis.
23 They've committed to invest $100 million in
24 downtown, and as a part of that commitment, the bank
25 advanced $425,000 to the city to pay for our planning
26 study and they were the first contribution that allowed
.
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1 the team to move forward with the process. They made a
2 $2.5 million loan to the city to acquire a long vacant
3 hotel as part of the city's effort to attract a team to
4 build a state of the art convention headquarters hotel
5 there.
6 They're considering taking a major role in the
7 redevelopment of a historic warehouse group of buildings
8 in downtown St. Louis where Western Hotels has recently
9 announced plans to locate a new property.
10 On the neighborhood level, NationsBank has made a
11 commitment to invest $100 million in low- and
12 moderate-income communities for neighborhood projects such
13 as mortgages, home improvement loans, small business loans
14 and small scale community development lending.
15 In closing, the one thing I was impressed with
16 most when NationsBank began to assemble their staff in
17 July of 1997 was that they hired from the community, from
18 community development professionals, from the former
19 director of Neighborhood Housing Services to the director
20 of the Community Development Program in St. Louis County.
21 It showed their commitment to working with the city on
22 community development. Thank you.
23 MS. SMITH: Thank you very much. Any questions?
24 We don't have any questions for you but we do
25 thank you very much for coming this afternoon to share
26 your views with us and having them become part of the
.
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1 record on this application. So thank you.
2 (Short break.)
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1 MR. SMITH: We have Tunua Thrash speaking on
2 behalf of Senator Barbara Boxer.
3 MS. THRASH: I am Tunua Thrash. I have
4 submitted the written statements of Senator Barbara
5 Boxer. I have a few remarks regarding her statement.
6 The comments of Barbara Boxer echo and
7 underscore those of the protesters of yesterday in
8 opposing the merger. Senator Boxer is concerned that
9 NationsBank will not have been the BofA that we have
10 known as the corporate citizen of San Francisco and
11 believes the pledge that NationsBank has put forward is
12 hollow in so much that it makes no specific commitment.
13 Senator Boxer is not yet convinced that
14 Californians will be well served, especially those
15 vulnerable communities by the combination of these two
16 banks. Senator Boxer would like to remind NationsBank
17 that California is no North Carolina and NationsBank must
18 be prepared to compete in California among its diverse
19 and emerging markets. Thank you.
20 MS. SMITH: Thank you very much. We already
21 have the statement for the record, right?
22 MS. THRASH: Yes.
23 MS. SMITH: We will here from Mr. Baird.
24 Do we have any other panelists?
25 (Off the record discussion.)
26 MS. SMITH: We'll start with Mr. Baird.
619
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.
620
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
621
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
622
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
623
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
624
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
625
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.
626
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.
21 MS. JOHNSON: I'm Marla Johnson. I'm from
22 Little Rock, Arkansas. I'm the COO of a company called
23 Aristotle Internet. I'm also the chair of the Arkansas
24 Small Business Coalition. I'm here to speak favorably of
25 NationsBank and their commitment to the Little Rock
26 community.
627
1 About a year ago some women business owners
2 and me had found out the City of Little Rock was involved
3 in some worthy goals to level the playing field and
4 encourage small business in Little Rock, but the means by
5 which they determined this, we felt, were a duplication
6 of services and a waste of resources. So we began to
7 form the Arkansas Small Business Coalition around this
8 problem and, in the meantime, became aware of similar
9 problems in our community.
10 We then became involved with NationsBank and
11 we became aware that, besides the public policy people in
12 our community, the corporate world and other government
13 regulators and dispensers of services were really not
14 connected to small businesses and that became a part of
15 our purpose. We realized that we weren't communicating,
16 much less were we a unified force for economic
17 development in the Central Arkansas area.
18 So we struggled against turf battles and
19 limited resources and we fought against a lot of people
20 who were not really in favor of our taking that kind of a
21 role, but the representatives of NationsBank were very
22 supportive. They were a new company in town, they
23 supported us and guided us. They saw that the goals that
24 we had were worthwhile ones. They lent us resources,
25 faxing machines and legal resources and gave a lot of
26 good advice.
628
1 Since then, we've grown. We've saved the
2 taxpayers from spending over a million dollars to fund a
3 program that would have actually competed with existing
4 free services and small businesses in the Little Rock
5 area.
6 We began to close the gap between community
7 leaders and small businesses, including women and
8 minority business owners, and we began to develop a
9 business resource center in downtown Little Rock. And we
10 are now providing many needed services and educational
11 resources to small businesses.
12 None of this would have been possible without
13 NationsBank. They have been a very valuable partner to
14 us, to the small businesses in Arkansas.
15 I would say that the qualities that
16 NationsBank representatives have had have been dedication
17 to services for the whole community including the small
18 business community. They have made a real effort to help
19 level the playing field, again, for small businesses.
20 They're not a business-as-usual kind of a company. They
21 really came in and did not join the good-old-boy network
22 but have provided real opportunities to minority and
23 women in businesses.
24 They have been generous, without strings
25 attached to nonprofits like the Arkansas Small Business
26 Coalition and have a corporate culture that nurtures
629
1 employees who want to serve the community. There have
2 been attentive to fairness with a broad view of economic
3 development. They have been resourceful and a skilled,
4 brave and a diplomatic partner to small businesses.
5 In other words, through the generous support
6 to the Small Business Coalition in Arkansas, NationsBank
7 has made a positive contribution to the Little Rock small
8 businesses.
9 It may seem ironic, as the chair of the
10 Arkansas Small Business Coalition and as a small business
11 manager, I am here to testify in favor of making
12 NationsBank an even bigger business, but it is true to
13 state that, in my experience, when NationsBank came to
14 Little Rock, small businesses gained the most effective,
15 generous and inclusive partner it had ever seen. As a
16 result, good things are happening for small businesses in
17 Little Rock.
18 MS. SMITH: Thank you. Any questions?
19 Thank you very much for coming this afternoon.
20 MS. SMITH: Our next witness is on his way up
21 from the lobby.
22 (Pause in proceedings.)
23 MR. KREHMEYER: I want to thank everybody for
24 the opportunity to speak here on behalf of the proposed
25 merger of Bank of America and NationsBank.
26 The Ecumenical Housing, the organization I
630
1 represent, is the largest not-for-profit housing provider
2 in St. Louis County, Missouri. We own and run almost 200
3 scattered site, single-family rental homes. We also
4 provide support services for families living in those
5 single homes, typically a single mom with three kids.
6 Through secure housing in good neighborhoods and the
7 provision of assistance with education and employment
8 programs, money management training skills, we help our
9 families long and continue them into economic
10 independence and self sufficiency.
11 When NationsBank first entered our community,
12 buying the largest banking institution and a friend of
13 not-for-profit sector, there was the fear that this huge,
14 out of town monolith would not be the partner and leader
15 that its predecessor was. While the dialogue to the
16 community was good, the old Missouri adage of "Show Me"
17 was very prevalent.
18 I am extremely pleased to report that
19 NationsBank has exceeded most of our expectations in
20 being a partner in our work and has become a leader in
21 bettering neighborhoods in the lives of families that
22 live there.
23 They have been pro active and aggressive in
24 looking at local problems and helping us fix them. Their
25 product experience in other markets has been invaluable
26 to us. St. Louis has a reputation of being unwilling to
631
1 try new things, but NationsBank has shown us that
2 community development problems can have many solutions.
3 NationsBank has taken a leadership role in the
4 much-needed revitalization of our downtown area and has
5 committed significant resources to the new Regional
6 Neighborhood Support Collaborative which provides much
7 needed operating resources for neighborhood-based
8 community development corporations.
9 In addition, the bank has impressed us by
10 hiring key staff from our community. Two of the leaders
11 in the community investment and development divisions are
12 the former Executive Director of our local Neighborhood
13 Housing Services affiliate and the former Director of
14 Community Development Agency for the City of St. Louis
15 and St. Louis County.
16 These two individuals bring a wealth of
17 knowledge about our community to the bank staff.
18 Further, these two individuals are well respected and
19 accessible to the front line folks who toil every day to
20 try to better their lives and the people in the community
21 they serve.
22 Our experience with NationsBank has been very
23 positive. It appears that as Ecumenical Housing,
24 NationsBank believes in the adage that "doing good is
25 good business."
26 We strongly support the proposed merger and
632
1 hope that our comments somewhat allay the fears of those
2 who may oppose it. Thanks.
3 MS. SMITH: Is there per chance anyone in the
4 room who is interested in taking the opportunity to use
5 our open mike session?
6 If not, I do believe that we have brought to a
7 conclusion our two-day meeting. I sort have sort of come
8 full circle to say this has been an important public
9 meeting for collecting information that will be relevant
10 to the board's determination on this application.
11 So we thank you very much. We thank all of
12 the other close to 200 people who came to present
13 testimony, and we are adjourned.
14 (Whereupon the proceedings concluded.)
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