Public Meeting Regarding NationsBank and BankAmerica - Panel 22
Friday, July 10, 1998
Transcript of Panel Twenty-Two
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19 MS. SMITH: Thank you. Question? Any other
20 questions? Well, thank you very much for coming this
21 morning. And it looks as if we're ready for the next
22 panel.
23 Okay, I think we're ready to start. And we'll
24 start with Mr. Herald.
25 MR. HAROLD: Mr. Harold is still out here.
26 MS. SMITH: Oh. Is there a chair for him?
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1 MR. HAROLD: I suppose you would like me to begin
2 now. Thank you.
3 MS. SMITH: Yes, if you would pull the mike
4 toward you.
5 MR. HERALD: My name is Michael Herald and I'm
6 the Executive Director of Housing California. We are a
7 statewide coalition of affordable housing advocates,
8 particularly nonprofit housing institutions, homeless
9 advocates and those who advocate for the poor and for
10 adequate public benefits.
11 We are, as I said, a statewide organization. We
12 operate out of Sacramento, we represent the nonprofit
13 trade associations, housing trade associations, that are
14 around the state. Our organization does a number of
15 things that are important to the field of nonprofit
16 housing.
17 First of all, we advocate in the state
18 legislature for additional subsidy dollars for affordable
19 housing. This year, we were successful in increasing the
20 state low-income housing tax credit by $15 million pushing
21 that figure up to $50 million. We have an additional $35
22 million in the state budget for affordable housing
23 programs, the first new funding for housing this decade.
24 And we've also been the principal sponsors and advocates
25 for making sure the national guard armories are kept open
26 in the winter months for homeless persons.
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1 We also sponsor the lowest largest low-income
2 housing conference that we're aware of in the country, it
3 draws over a thousand people annually to Sacramento to
4 hear over -- to attend over 48 workshops during a lobbying
5 visit to the state capitol. We have several major keynote
6 speakers who always come in. We provide over 200
7 scholarships to low-income persons and people of color so
8 that they can come from far distances and attend our
9 conference. We pay all their costs. In 1996, we
10 conducted a voter registration drive that registered over
11 32,000 low-income and homeless persons on sites all over
12 the state.
13 Lastly, we have been one of the principal
14 advocates in the state over the last five years for
15 increasing community investment by corporate -- by
16 corporations. Specifically, we have been very active in
17 organizing and encouraging more community investment by
18 insurance companies and we helped to create the California
19 Organized Investment Network which is a pilot project
20 operating out of the State Department of Insurance which
21 has already generated over $40 million in new investment
22 in California, and we are working closely with them to
23 establish an intermediary called Impact Capital which will
24 actually generate even more, up to $400 million over the
25 next several years for affordable housing and community
26 economic development.
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1 The members of our organization are very
2 concerned about the merger of Bank of America and
3 NationsBank. While we don't come here today to
4 specifically oppose the merger, we do want to share with
5 you our concerns.
6 The bank has been -- the CRA bank in California
7 has been an absolutely crucial player to the development
8 of nonprofit organizations in California. They have
9 funded and promoted and provide investment dollars for a
10 number of activities. I'll just touch on a few just to
11 give you an example of some of the things they have worked
12 on and have helped with.
13 The Nonprofit Housing Association of Northern
14 California located here in San Francisco has been the
15 recipient of several grants, one of which was a major
16 project to help which the bank assisted in funding which
17 has been a very big project on NIMBE, the Not In My
18 Backyard Experts, assisting community groups and nonprofit
19 housing developers to overcome barriers and opposition the
20 neighbors have and they've developed a lot of really
21 profound materials that are being used all over the state.
22 The bank has also been very helpful in promoting
23 diversity in the nonprofit housing community. They have
24 funded grants to both the Nonprofit Housing Association
25 and the California Coalition for Rural Housing, that I'm
26 aware of, that have promoted diversity in the nonprofit
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1 housing community. Each year they provide funding and
2 those organizations place people of color at nonprofit
3 organizations and really encourage their development in
4 the nonprofit world.
5 Other organizations like the Southern California
6 Association of Nonprofit Housing have also benefited in
7 similar ways. The bank has been very supportive of them
8 over the years. They have been a very big player in
9 marshaling more resources, subsidies, if you will, to
10 build more affordable housing in Los Angeles. The same is
11 true with the Federation for Nonprofit Housing in
12 San Diego, the bank has been there and has been a partner
13 in this work with them.
14 The California Coalition for Economic
15 Development, likewise, they've been our partners in
16 working to increase investment by insureds and they have
17 also been benefited by the bank and have been constantly
18 supported and helped through working on the issues that
19 folks in the economic development world are concerned
20 about.
21 And I guess the way we would capture this whole
22 thing is that the CRA bank has been critical, it's helped
23 us to create partnerships. We talked for many years about
24 how we could create public-private partnerships. In the
25 last decade, the CRA bank has been the master of doing
26 that. They have been in every one of our conferences,
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1 they are virtually ubiquitous, you cannot turn around
2 without seeing a BofA CRA person at the conferences
3 working with nonprofit organizations. They have deep and
4 strong relationships built on real business relationships.
5 Lately, we have even seen them increasingly hire
6 out of the nonprofit world and hire to the bank. And so
7 there's such a cross-fertilization now going on between
8 what the CRA bank does and what our nonprofit
9 organizations in California do, that in some respects, I
10 mean, when I go and meet people in the CRA bank, I knew
11 them for years when they were with nonprofit
12 organizations. We all speak the same language.
13 Just to sum up, three things that we're asking
14 the Federal Reserve to do. One is we're very concerned
15 that NationsBank will not have the same relationship with
16 our California nonprofits that we've experienced and
17 enjoyed to date. Particularly worried that there's not a
18 long-term commitment and a firm commitment to funding
19 multi-family housing. And we really want the Federal
20 Reserve to closely examine and make sure that NationsBank
21 continues the work that the CRA bank has done and build on
22 the trust that we have.
23 Second, we are discouraged and concerned that
24 there's not a greater level of charitable giving going to
25 nonprofit organization that sponsor activities. Likewise,
26 we are concerned that there's not enough charitable giving
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1 going to the state and regional organizations which are
2 sponsoring the activities that I described above.
3 And then, lastly, I just wanted to say that
4 California's needs, housing needs, are profound. We have
5 seen a series of recent studies that have come out
6 recently that are describing -- that we have the worst
7 rental market in the county. Nine of the twelve worst
8 homeownership markets. And we would strongly encourage
9 the bank to deepen their commitment beyond the $70 billion
10 that they've committed to California. NationsBank coming
11 in and promoting the same thing, even though the size of
12 the bank has doubled, is not appropriate. Thank you.
13 MS. SMITH: Thank you very much. Ms. Raucher.
14 MS. RAUCHER: Thank you very much. My name is
15 Deborah Raucher, and I'm with East Bay Housing
16 Organizations.
17 East Bay Housing Organizations is a coalition of
18 affordable housing advocates in Alameda County. Our
19 membership of over 130 individuals and organizations
20 represents nonprofit developers who create affordable
21 housing and others in the affordable housing fields.
22 My organization provides advocacy and education
23 around the issue of affordable housing, including a
24 campaign to educate people about the benefits of
25 affordable housing.
26 It is no secret that in the Bay Area housing
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1 costs are skyrocketing and affordable housing is becoming
2 more and more difficult to find. At developments in
3 Alameda County, families must wait years in order to get
4 access to affordable housing. And as the federal
5 government shrinks from its role in providing affordable
6 housing, many seniors, families and people with
7 disabilities are at risk of losing their housing,
8 exacerbating the already existing crisis.
9 In the East Bay, as in many other regions,
10 nonprofit community-based developers have been at the
11 forefront of addressing this need. Nonprofit developers
12 have created and maintained thousands of affordable units
13 in Alameda County. During the past five years, over 2500
14 new affordable rental units have been created throughout
15 the county.
16 These developments are a vital asset to our
17 community and house our senior citizens, people with
18 disabilities, low-income working families, including our
19 teachers, day-care workers, retail workers and, of course,
20 our children. Such developments are crucial, as well, to
21 neighborhood revitalization efforts and stabilizing
22 neighborhoods.
23 For example, in East Oakland we've seen
24 affordable housing developments revitalize neighborhoods
25 and provide needed services, such as child care, health
26 services and employment training.
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1 Time and time again, I've heard stories of
2 families who are able to improve their employment
3 situation, save money for the purchase of a home, see
4 their children's performance in school improving as a
5 result of having access to safe, decent and affordable
6 housing.
7 A tremendous need, however, still exists and more
8 affordable housing is vitally important. And this cannot
9 happen without the participation of financial
10 institutions.
11 Bank of America, as one of the largest financial
12 institutions in the region, has been an absolutely vital
13 component in this equation in our communities and the loss
14 of the resources provided by Bank of America for these
15 purposes would be devastating to the creation of more
16 affordable housing.
17 The reason that I'm here today is that I'm very
18 concerned about the lack of specificity and targeting in
19 NationsBank's recently announced commitment to CRA, as
20 well as their lack of a written commitment. And I would
21 like to urge you to consider requiring NationsBank to make
22 a more specific and written commitment to their CRA
23 requirements as a condition of the merger.
24 Some of the examples of things which Bank of
25 America has provided in this community has been their
26 Community Development Bank where people have developed an
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1 expertise about the needs of California's communities.
2 I'm concerned that a bank coming from outside the region
3 won't have the same expertise about the issue of
4 affordable housing and the specific needs of California
5 communities.
6 In addition, the Community Development Bank has
7 been a vehicle for many developers in our county to access
8 money through the Affordable Housing Program operated by
9 the Federal Home Loan Bank. There's been no commitment by
10 NationsBank to continue this program.
11 Other important programs that Bank of America
12 operates that are at risk for being lost is the At Risk
13 HUD Preservation Housing Projects. Expiring HUD projects
14 present an extremely serious threat to our communities'
15 affordable housing stock and a loss of this resource could
16 have broad negative impacts on our communities.
17 In addition, there's been no commitment by
18 NationsBank to prioritize nonprofit housing developers.
19 In Alameda County, nonprofit developers have a level of
20 expertise and commitment to providing affordable housing,
21 and we would hope that NationsBank would make a commitment
22 to utilize this resource.
23 Another concern that I have is the potential for
24 NationsBank to bring their own Community Development
25 Corporation into our communities which will conflict with
26 our already highly successful nonprofit development
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1 community and which will not be able to understand and
2 address the needs of our communities as our local CDCs are
3 able to do.
4 Another major concern that I have is the risk of
5 losing Bank of America's corporate giving program.
6 Nonprofits in my community are doing vital and important
7 work to help low-income communities, and a lot of these
8 organizations, my own included, are dependent on
9 charitable contributions.
10 My own organization receives funding from Bank of
11 America Corporate Charitable Giving Program for our
12 operations to educate the general public about the need
13 for affordable housing and the benefits for which
14 affordable housing provides to communities. And as
15 resources for our work become more and more scarce, the
16 loss of this would be devastating to nonprofit
17 organizations in Alameda County.
18 California's communities are unique and there
19 needs to be a specific commitment which addresses the
20 particular needs of our communities. I urge you to
21 consider not allowing this merger unless specific
22 commitments are made by NationsBank. Not only in the area
23 of affordable housing finance and corporate contributions
24 but in targeted home purchase lending, small business
25 lending, community economic development, and consumer
26 issues which affect low-income and minority communities.
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1 Thank you very much.
2 MS. SMITH: Thank you. Ms. Haws.
3 MS. HAWS: Good morning. This testimony is
4 submitted on behalf of Sally Gallegos, Executive Director
5 for United Indian Nations which is a job training and
6 placement program that serves Native Americans, young
7 adults 18 and over in the East Bay.
8 United Indian Nations also has a community
9 development corporation which is a nonprofit developer of
10 housing and employment opportunities that are true to
11 Native American cultures and values to promote the
12 economic and social well-being for Native Americans in the
13 San Francisco Bay Area.
14 United Indian Nations has created an urban Indian
15 initiative to acquire and develop property on closing
16 military bases and other surplus federal lands that
17 directly connects low-income communities to housing,
18 employment and revenue generating opportunities.
19 This initiative is a model development mechanism
20 that can be replicated by urban and rural and Native
21 American organizations to mitigate negative impacts on our
22 community from historical federal policies.
23 The Bureau of Indian Affairs Relocation Program
24 initiated in the early 1950s and continued until the early
25 '70s created dramatic changes in the number and character
26 of American Indian populations in urban centers. As a
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1 direct result of these federal programs, more than 85,000
2 American Indians moved from reservations to urban areas
3 and many others followed to join their extended families
4 or find better employment or educational opportunities.
5 According to the 1990 U.S. Census, which
6 undercounts Indian people overall, more than 65 percent of
7 American Indians now live in urban areas. In addition,
8 the urban Indian populations have historically been
9 excluded from federal, state and foundation funding
10 targeted for Native American projects located on or linked
11 to -- excuse me, linked to the provision of service or
12 products to reservations rural communities or tribal
13 governments.
14 The San Francisco Bay Area Native American
15 community is one of the largest and fastest growing in
16 Indian populations in the country today. The 1990 census
17 reported more than 40,000 Indians in the Bay Area,
18 although we realize this number is closer to 60,000.
19 Although it's one of the smallest ethnic minority groups
20 in the area, it's the third largest concentration of urban
21 Indians in the United States. The demographic and
22 socioeconomic stresses of the Bay Area Indian community
23 reflects the history that brought Indians to this area.
24 These conditions are exasperated and the following
25 socioeconomic and psychological problems face our
26 community.
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1 It is the fastest growing urban Indian population
2 in the country today. The population has increased more
3 than 600 percent since 1960. Following from this, the Bay
4 Area has a disproportionate number of young people,
5 approximately 40 percent of our population are under the
6 age of 25. Considering that suicide is the second leading
7 cause of death for Indian adolescents, the need to
8 meaningfully engage this growing population in moving
9 towards family self-sufficiency is our highest priority.
10 In order to engage these individuals, we have to raise
11 educational levels.
12 Bay Area Indians have considerably lower
13 educational attainments than the general population. In
14 1990, nearly one in four American Indians had not earned
15 their high school diploma. Unemployment rates for
16 American Indians are higher than those of other Bay Area
17 residents. In 1990, nine percent of the community was
18 unemployed, as opposed to five percent for the general
19 population. Employed Bay Area American Indians, about
20 20,000 in 1990, tended to occupy blue-collar positions and
21 very few were managers. Overall, the Bay Area American
22 Indian population has a dramatically low average income.
23 The per capita income in 1990 was $14,000, compared with
24 19,600 for the area as a whole. The proportion of
25 American Indian families living in poverty is 11 percent,
26 was nearly twice as high for all Bay Area families at six
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1 percent. Additionally, more than one-third of Indian
2 households headed by women were living in poverty, 35
3 percent, compared to less than 20 percent for the total
4 population.
5 A low proportion of Bay Area American Indian
6 families own property and the denial rates for American
7 Indian mortgage lending has risen steadily. Only 40
8 percent of American Indian households owned homes in 1990,
9 compared to 57 percent of all Bay Area households.
10 United Indian Nations Community Development
11 Corporation currently has three exciting projects in the
12 Bay Area. Transitional housing at the Alameda Naval Air
13 Station. We have an American Indian Museum and Cultural
14 Center which is a regional educational museum at the Oak
15 Knoll Naval Hospital. And the United Oakland Eco Parks, a
16 community driven redevelopment project for 220 acres at
17 the Oakland Army Base.
18 We are not here to oppose the merger between Bank
19 of America and NationsBank. But in order for United
20 Indian Nations to continue to revitalize our community and
21 our neighbors in the East Bay, we need to have continued
22 access to Bank of America's level and range of
23 contributions for nonprofit infrastructure and continued
24 support for projects that target very low-income urban
25 communities.
26 The Bank of America has been a positive CRA force
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1 in California institutionalizing community reinvestment as
2 a business through the Community Development Bank.
3 Considerable expertise about community reinvestment as a
4 business and about the needs of the California community
5 has come to be housed at the Community Development Bank.
6 Bank of America's Rural Initiative 2000 has targeted
7 funding to reservations and rural American Indian projects
8 bringing significant new benefits to those underserved
9 communities.
10 A merger with NationsBank should augment the
11 current benefits to low-income communities in California
12 and bring additional funding and range of services for
13 urban initiatives without reducing the current grassroots
14 service provided by Bank of America. Thank you.
15 MS. SMITH: Thank you. Ms. Hill.
16 MS. HILL: Good morning. I'm Reverend Terry
17 McCray-Hill and I'm the pastor of a parish community that
18 has felt the pressures of the closure of a branch of Bank
19 of America that has been in their community for over 75
20 years.
21 The significance of my testimony today is neither
22 pro nor con but is merely a statement from one through a
23 continuum of ministry in that community has heard the
24 complaints of people from low to middle income within a
25 distressed neighborhood that are anguished by the lack of
26 an insured depository institution providing full-scale
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1 financial transactions after 75 years of continued
2 services.
3 Just for a brief synopsis of what our community
4 looks like, you've probably heard testimony regarding this
5 neighborhood over your course of proceedings, but it is
6 the OMI, which stands for Oceanview Merced Heights in
7 Ingleside. This community is a potpourri of over 20,000
8 low and middle class residents and has traditionally been
9 underserved due, in part, to being included in the
10 community immediately adjacent to them which is
11 comparatively wealthy in proportion.
12 Based on the 1990 census, our data indicates that
13 OMI residents are 41 percent African American, 26 percent
14 Asian-Pacific Islanders, 16 percent Caucasian, 11 percent
15 Latino, and 6 percent others. If we look at that in terms
16 of the children and youth in that community, one out of
17 every four persons is a child under the age of 18.
18 Many of the residents and merchants located
19 within this community were severely inconvenienced by the
20 closure of the Ocean Avenue/Faxon branch of BofA.
21 Discussions ranging from the disadvantages of a
22 full-service financial institution in the life of the
23 community, even to those discussions concerning life after
24 closure, have persisted since the announcement of a
25 possible closure in 1997.
26 My purpose for being here today is merely to say
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1 that, though distressed, this community has found unity
2 and hope within its diverse ethnic and socioeconomic
3 mixture and would benefit greatly from programs sponsored
4 by BofA that provide stress, economic, development and
5 other ways of mitigating any perceived differences in risk
6 and return between low income, minority and distressed
7 neighborhoods and other neighborhoods as referenced in the
8 Community Reinvestment Act of 1997.
9 What can we do and what shall we look forward to
10 Bank of America continuing to provide? We look forward to
11 programs that stress investment for low income, that
12 stress how to save so that we now see capital gains, as
13 opposed to just merely looking for a financial institution
14 as a place for the cash and return of checks.
15 We hope that the token and pledge made by Bank of
16 America will be carried out invisible in this community
17 should the merger occur between NationsBank Corporation.
18 I thank you for your time and I look forward to
19 seeing the fruits of your labor in collaboration with
20 community, not only across California and this nation but,
21 in particularly, in OMI. Thank you.
22 MS. SMITH: Thank you very much. Mr. Bivens.
23 MR. BIVENS: Good morning. Presiding officer and
24 members of the panel, my name is Bob Bivens and I am a
25 member of the National Board of Directors and President of
26 the Stockton, California branch of the National
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1 Association for the Advancement of Colored People.
2 Generally known as the NAACP.
3 I appreciate the opportunity to come before this
4 body today to give testimony expressing concern and
5 opposition for the public record regarding the proposed
6 acquisition of Bank of America Corporation by NationsBank
7 Corporation. And to quote our chairman of the Board of
8 Directors, the Honorable Julian Bond, bank mergers need to
9 be opposed when banks do not address the specific needs of
10 minorities and the poor.
11 The NAACP was founded in 1909 and we are the
12 oldest civil rights organization in America with over 200
13 units in California and over 1700 units across this nation
14 and in several countries abroad. The NAACP has a long
15 history of fighting for civil rights, economic and
16 community development and self-sufficiency for African
17 Americans and other ethnic minority groups and all
18 disenfranchised people in America.
19 While we remain focused on our founding
20 principles, we have in recent years taken a more
21 aggressive and proactive approach to achieving economic
22 and community empowerment.
23 Some of our concerns are the $350 billion
24 announcement, while is an impressive sum of money,
25 nonetheless, it lacks the specificity and targeted lending
26 service and investment components needed in a full
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1 community reinvestment commitment. More specifically, it
2 does not address the critical needs of the California
3 communities.
4 The banks have refused to make specific and
5 meaningful written commitment to California. They have
6 verbally told me and the national board -- as a national
7 board member representing the NAACP for the State of
8 California and the Stockton branch and members of the CRC
9 in meetings that they are allocating approximately $70
10 billion to California, the same 70 billion already
11 allocated to this state under the 1997 Bank of America
12 $140 billion lending goal. In other words, the banks have
13 not committed one additional penny to California and that
14 will be the state that's most impacted by this merger,
15 that will lose the headquarters of the largest bank and
16 will see the state's -- Bank's successful community
17 reinvestment program dismantled.
18 No written commitment to provide specific
19 products and services targeted at the unique needs and
20 priorities of California's diverse regions and people.
21 There is no written commitment to establish a
22 floor goal, or targeting, for lending in this area and
23 specifically the Central Valley of California for small
24 businesses nor any commitment to target loans or lines of
25 credit of 50,000 or less to small minority-owned
26 businesses.
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1 There is no written commitment to prioritize
2 nonprofit housing developments which will keep housing
3 developments at the greatest level of affordability for
4 the longest period of time.
5 NationsBank has a CDC which develops its own
6 housing developments. The California branches of the
7 NAACP are concerned that, were it to function in a similar
8 manner here in California, it would conflict directly with
9 the state's thriving infrastructure of nonprofit housing
10 developments. In negotiating meetings with the banks, the
11 California State Conference of the NAACP and CRC members
12 have requested that NationsBank only do investment and
13 lending but no development in California. NationsBank has
14 categorically refused to make such a commitment. Although
15 the NAACP has an ongoing relationship with NationsBank
16 with our Community Development Resource Centers, this has
17 no bearing on California and Bank of America has not been
18 agreeable to establish a similar type program.
19 There's no written commitment to continue Bank of
20 America's program of appointing a liaison on community and
21 fair housing issues.
22 There's no written commitment to develop a
23 program to provide venture capital to minority-owned
24 businesses, especially those located in the distressed and
25 rural areas of California.
26 There's no evidence to adopt a commitment to any
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1 written goals or purchasing a certain percentage of goods
2 and services consumed in California's minority-owned
3 vendors in California.
4 I'm going to skip over a lot of this, I'll be
5 submitting it to the record. Regarding the proposed
6 acquisition of Bank of America Corporation, the NAACP
7 California State Conference of Branches and myself as an
8 elected member of the board of directors from California
9 stand ready as resources to ensure that certain goals are
10 met and matters are not overlooked if a merger of the two
11 institutions goes forward.
12 We are extremely concerned about the consumer
13 protection, competition and economic expansion.
14 Successful and effective mergers are to lower costs,
15 improve product quality or enhance efficiencies. The
16 proposed new bank's commitment of 350 billion in community
17 development lending and investment over the next ten years
18 is an indication of an expected enhanced delivery of
19 services resulting from a merger.
20 350 billion represents the largest community
21 development commitment ever announced by a financial
22 institution. This is an opportunity for organizations
23 like the NAACP to challenge this bank and an opportunity
24 for the new bank to live up to the bank's chartered role
25 as an economic leader in the communities. Again, thank
26 you for the opportunity to appear before you today.
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1 MS. SMITH: Thank you very much. Mr. Prince.
2 MR. PRINCE: Chairperson Smith, members of the
3 board, thank you for the opportunity to testify today.
4 My name is Chuck Prince, I'm the Executive
5 Director of the Southeast Idaho Council of Governments.
6 I'm not from California -- actually, I was raised in
7 California but I'm one of the few members of the panel
8 today that are here that isn't from a California
9 organization. I'm here today representing the National
10 Association of Development Organizations, NADO.
11 I'm here to express NADO's conditional support
12 for the proposed merger. NADO is a national association
13 of regional development organizations serving rural and
14 small metropolitan communities throughout America. The
15 association, a public interest group founded in 1967,
16 provides its members with training, information and
17 representation and has been a leader in promoting the
18 interests of America's frequently forgotten small towns
19 and rural regions.
20 Regional development organizations are
21 multi-county service delivery providers that pool
22 otherwise thin local resources across a region and are
23 catalysts for cooperation between citizens and the public
24 and private sectors. Most of America's rural towns --
25 rural areas and small towns which are home to over 77
26 million people are sreved by regional development
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1 organizations. One of the most important functions of
2 these organizations is capitalizing and managing revolving
3 loan funds that serve the credit needs of small high risk
4 businesses unable to obtain loans on their own for private
5 commercial lenders. Often, these revolving loan funds are
6 the only available non-commercial source of credit, so
7 they play an important role in local economic development.
8 This brings me to the focus of our concerns and
9 our conditioned support for the proposed merger. The most
10 compelling reason we feel this merger should be approved
11 is the $350 billion ten year commitment to community
12 development lending made by NationsBank/Bank of America on
13 May 20, 1998. Simply put, this commitment is
14 extraordinary and will have a long-reaching impact both in
15 the community served by the merged bank and in
16 establishing a benchmark for future bank mergers.
17 However, even with the $350 billion commitment, we feel
18 the merger should be approved with very specific
19 conditions.
20 First, that the Bank of America Community
21 Development Bank be retained and expanded in both mission
22 and function. The Community Development Bank is unique.
23 Its vision statement which reads, in part, to support
24 community growth and prosperity by being the catalyst for
25 or by forming public/private partnerships for funding, has
26 led directly to a work program which loaned over $560
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1 billion -- excuse me, $560 million for affordable housing
2 in 1997. The Community Development Bank's great success
3 is attributable to its outreach to nonprofit housing
4 development network as a pool of partners and borrowers.
5 And recognizing that the affordable housing lending
6 process requires specialized skills, many of the Community
7 Development Bank's 300 staff were recruited from this
8 nonprofit network. The NationsBank/Bank of America
9 Corporation $350 billion commitment includes $115 billion
10 for affordable housing. The only logical steward and
11 conduit for these funds is the Bank of America Community
12 Development Bank.
13 Two, using the Bank of America Community
14 Development Bank's affordable housing development
15 activities as a template, the merged bank should create an
16 entity dedicated solely to community economic development.
17 Just as the Community Development Bank has reached out to
18 the nonprofit housing development corporations for
19 affordable housing partnerships, this new entity should
20 reach out to the community economic developing network,
21 including regional development organizations, for business
22 and job creation ventures. Only by making an
23 organizational and structural commitment to the community
24 economic development will the merged banks' actual lending
25 and investments come close to matching the promises of its
26 May 20th, 1998 press release.
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1 Three, we commend the NationsBank/Bank of America
2 $10 billion commitment to rural America. We ask that the
3 purposes of this rural pool be sufficiently broad to
4 include financing for community facility and
5 infrastructure improvements. Many small cities, special
6 districts and counties often find it difficult to finance
7 city halls, jails, water and sewer systems, community
8 centers and streets. Participation of the new BankAmerica
9 in meeting these credits needs would be a valued
10 contribution in efforts to better rural America.
11 Four, the merged bank has also pledged $180
12 billion for small business lending and $25 billion for
13 economic development. To say that these are substantial
14 amounts of needed capital is a gross understatement.
15 However, we're greatly concerned that the lion's share of
16 these funds will be used for government insured loans.
17 While these loans are an important tool in job creation
18 efforts, they truly represent little risk to the bank and
19 only serve a very narrow spectrum of the needs of the
20 small business credit continuum.
21 In order for these funds to have greatest impact,
22 we believe a large portion of these funds should be
23 targeted towards direct loans to higher risk borrowers
24 including business start-ups, investments in and grants to
25 revolving loan funds of regional development
26 organizations, creation of an accessible secondary market
.
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1 for loans made by development organizations through the
2 revolving loan funds, creation of a set-aside for small
3 business lending and investment in rural and small
4 metropolitan communities for ventures of any size.
5 A recent NationsBank/Bank of America publication
6 calls for only making loans to ventures creating more than
7 25 jobs in rural or lower and moderate income communities.
8 This limitation is artificial and simply doesn't reflect
9 the job creation activities in rural America where three
10 and four employee ventures are the rule and 25 employee
11 ventures the major exception.
12 And four, the development of venture capital
13 pools at regional development organizations and other
14 regional multi-state intermediaries.
15 Only by adding these higher risk activities in
16 with the safety of government insured loans will the
17 merged bank begin to approach meeting the credit needs of
18 small world businesses.
19 In conclusion, Chairperson Smith, NADO
20 conditionally supports this merger. As stated at the
21 outset, a $350 billion commitment to community development
22 lending and investment is unprecedented. However,
23 translating funding commitment to real impact requires a
24 focused plan of action.
25 This plan should contain, one, retention of the
26 Bank of America Community Development Bank. Two, creation
.
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1 of an equivalent to the Community Development Bank
2 focusing on community economic development. Three, a
3 vision of the community development needs of rural
4 America's broad enough to include infrastructure finance.
5 And four, an approach to small business and economic
6 development lending that features a rural set-aside and a
7 mix of both government insured and non-traditional higher
8 risk loans and investments.
9 Thank you for the opportunity to testify today.
10 MS. SMITH: Thank you very much. Questions?
11 MR. FRIERSON: I'd like to thank all the
12 panelists for coming here and giving us this very
13 important information, and to remind you that if you do
14 have written statements you can submit them for the record
15 at the table outside , and we'll make sure they're
16 included as part of the record, it will be reviewed in
17 this application. Thank you very much.