The Wells Fargo buyout of First Interstate is still a proposal, not a deal, but that hasn't prevented Los Angeles Mayor Richard Riordan from staking out an early political position.
The mayor is afraid that if Wells Fargo & Co. bought Los Angeles-based First Interstate Bancorp, the ensuing job loss would seriously harm the local economy.
His spokeswoman, Noelia Rodriguez, said he discussed his concerns last week with First Interstate chairman William E.B. Siart, and found that Mr. Siart - who has so far rebuffed Wells' overtures - shares them.
Ms. Rodriguez added that Mr. Riordan is eager to do whatever he can to reduce job losses, short of actually trying to delay or halt the merger. But analysts said he is basically powerless to do anything but jawbone.
"It's just political noise," said James Marks, an analyst with Hancock Institutional Equity Services in San Francisco.
Nonetheless, the mayor's comments highlight what could be a painful fact for Southern California - that the region is likely to sustain more job losses and office closings than the northern part of California if San Francisco-based Wells succeeds with its unwelcome takeover.
Both of the banks have more big offices and branches in the south than in the north. Thus more office closings and layoffs would be expected in Southern California.
For example, in Los Angeles, San Diego, and Orange counties, First Interstate has 193 branches and 6,392 employees. Its 73-story headquarters in downtown Los Angeles is the tallest building in the West, just a block away from a 62-story building that houses the head office of its lead bank.
Wells Fargo has 244 branches and 4,439 employees in the three Southern California counties. The company itself occupies 10 floors in a three- building complex in downtown Los Angeles called Wells Fargo Center.
By contrast, in the Northern California counties of Contra Costa, Sacramento, San Francisco, and Santa Clara, First Interstate has only 56 branches and 687 employees. More than 10,000 Wells Fargo employees work in these counties, but many are in operations and administrative jobs. Wells only has 124 branches in those areas.
Wells Fargo has a total of 19,651 employees and 634 branches in California. First Interstate has 27,450 employees and 1,142 branches in 13 western states. About a third of First Interstate's employees and branches are in California.
Wells officials have said they would expect to cut costs within 18 months of a merger by $800 million, or about 18% of the combined expenses. The Wells officials also said they might have to sell some branches in Sacramento and San Diego to alleviate antitrust concerns, but that such divestitures would be minimal.
Wells officials say they have instituted a hiring freeze and would expect the company's normal attrition rate of 18% a year to reduce the need for layoffs. But even with the freeze, analysts expect the job cuts to be substantial and to account for more than half the cost savings.
George M. Salem, a New York-based analyst with Gerard Klauer Mattison & Co., estimated that roughly 6,500 jobs would be lost.
In another merger-related development, other leading financial institution executives said in off-the-record conversations that if they were in Mr. Siart's position at First Interstate, they would have reacted to Wells' $10 billion stock bid in exactly the same way.
But each of three chief executives, who represent thrifts as well as banks, said their publicly stated disappointment with the offer would be little more than crocodile tears aimed at getting a better price.
"I would be screaming bloody murder but as thankful as I could be," said one thrift chief executive, explaining that the price Wells offered seemed too good to refuse.
"The only thing you can do is squeal like a stuck pig and maybe get a higher price," a bank chief executive added.
Meanwhile, community activists already are clamoring for greatly increased lending to minorities and low-income people from the two banks if they merge. Two San Francisco-based groups, the Greenlining Coalition and the California Reinvestment Committee, have said they would ask the merged banks to commit 4.5% of their assets annually to this type of lending, or at least $47.7 billion over 10 years, said Alan Fisher, executive director of the reinvestment committee.
Mr. Fisher said such a commitment would be comparable to the 4.5% of assets that Union Bank, which is merging with Bank of California, recently pledged. But it would be six times as much as Wells and First Interstate currently have committed to this type of lending, Mr. Fisher added.
