Public Meeting Regarding NationsBank and BankAmerica - Panel 29
Friday, July 10, 1998
Transcript of Panel Twenty-Nine
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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
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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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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
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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
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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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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
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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
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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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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
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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.