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Public Meeting Transcripts
Public Meeting Regarding NationsBank and BankAmerica
Friday, July 10, 1998
Transcript of Panel Thirty-One
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.
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