Public Meeting Regarding NationsBank and BankAmerica
Friday, July 10, 1998
Transcript
1 2 3 4 PUBLIC MEETING 5 NATIONSBANK/BANKAMERICA PROPOSED MERGER 6 ---oOo--- 7 8 9 10 11 SAN FRANCISCO, CALIFORNIA 12 FRIDAY, JULY 10, 1998 13 14 15 16 17 18 19 20 21 22 23 24 25 26 415 1 JULY 10, 1998 8:37 A.M. 2 P R O C E E D I N G S 3 ---oOo--- 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 416 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. 417 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 418 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. 419 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 420 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 421 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 422 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 423 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. 424 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 425 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 426 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 427 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? 428 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. 429 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. 430 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 431 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 432 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 433 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. 434 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 435 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 436 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 437 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; 438 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 439 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 440 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. 467 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, . 470 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 . 471 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. . 472 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 . 473 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 . 474 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 . 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 . 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 . 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. . 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 . 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 . 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 . 481 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? . 482 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. . 483 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. . 484 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 . 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, . 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 . 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 . 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. . 489 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 . 490 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 . 491 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. . 492 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 . 493 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. . 494 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 . 495 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 . 496 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 . 497 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 . 498 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 . 499 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 . 500 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. . 501 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 . 502 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. . 503 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 . 504 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 . 505 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. . 506 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 . 507 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 . 508 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. . 509 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 . 510 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. . 511 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. . 512 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 . 513 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 . 514 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 . 515 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 . 516 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 . 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 . 518 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 . 519 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 . 520 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 . 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. . 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? . 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. . 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 . 525 1 daylight time. 2 (Short break.) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 . 526 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 . 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 . 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 . 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 . 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 . 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. . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 540 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 . 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. . 542 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 . 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? . 544 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. . 545 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 -- . 546 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 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 . 555 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 . 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 . 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. . 558 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 . 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 . 560 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. . 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 . 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 . 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 . 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. 592 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. 593 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 595 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.) 596 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 26 600 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. . 601 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. . 603 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 . 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. . 605 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. . 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 . 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. . 613 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 . 614 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 . 615 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 . 616 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 . 617 1 record on this application. So thank you. 2 (Short break.) 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 . 618 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.) 15 16 17 18 19 20 21 22 23 24 25 26