Public Meeting Regarding NationsBank and BankAmerica - Panel 26
Friday, July 10, 1998
Transcript of Panel Twenty-Six
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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
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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
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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.
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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
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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
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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
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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
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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.
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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
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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
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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.