Wells Fargo & Co. chairman Paul Hazen told the Federal Reserve on Monday that a merger with First Interstate Bancorp would bring more jobs, inner-city lending, and small-business financing to California.
"A Wells Fargo-First Interstate merger would mean an increased number of benefits from policies that have made Wells one of the first banks to get an 'outstanding' Community Reinvestment Act grade," said Mr. Hazen, who also is Wells' chief executive.
His comments opened a week of hearings by the Fed on the competing bids of Wells Fargo of San Francisco and First Bank System Inc. of Minneapolis for Los Angeles-based First Interstate.
The Fed is trying to assess the potential effect of each proposal on banking services in the region. It also will examine the community reinvestment records of all three banks. The Fed cannot approve a merger that would harm a community in terms of convenience and meeting needs.
In his testimony, Mr. Hazen said Wells Fargo's $45 billion reinvestment commitment would create 700,000 jobs, provide $25 billion of small-business lending, build 100,000 low-income housing units, and offer $4 billion of consumer financing to low-income people.
The merger also would ensure that decisions about banking services in Los Angeles are made by a California-based institution that knows the community, he said. Wells also would continue buying goods and services in California, providing jobs to state residents, he said.
But Mr. Hazen's arguments did not mollify civic leaders who would prefer First Interstate remain independent.
Los Angeles Mayor Richard Riordan said Wells Fargo's $45 billion commitment doesn't provide enough detail on how jobs would be created or how small businesses would be financed.
"I want a focused, willful commitment to the communities of Los Angeles," Mr. Riordan said.
Several members of Congress also whacked at the Wells bid. Rep. Lucille Roybal-Allard, D-Calif., said the merger would have a "devastating impact" on the availability of credit in low-income communities and cost the area 10,000 jobs.
Rep. Maxine Waters, a California Democrat on the House Banking Committee, criticized Wells Fargo's lending pledge as unenforceable. "It is far from the kind of proposal we can count on," she said.
A dozen members of the Los Angeles City Council also testified against the deal. Councilman Michael Feuer said senior citizens who don't understand how to use computer banking or automated teller machines would be the biggest losers. "Neighborhood branch banking is what senior citizens have gotten used to, and they are very important," Mr. Feuer said.
The closing of First Interstate's Los Angeles headquarters would devastate the downtown real estate market, where the bank is the largest single tenant, Councilman Richard Altorre told the Fed.
The merger would give shareholders an undeserved $700 million windfall, Councilwoman Jackie Goldberg said. "Where does that $700 million come from?" she asked. "It doesn't fall from the sky. It comes from laying off $700 million worth of workers."
Wells Fargo's bid was supported by local activists. The Greenlining Institute, a coalition of 26 community groups, said the bank's $45 billion CRA pledge could create 715,000 jobs.
"This is the best pledge in (the) history of CRA," said George Dean, the institute's co-chairman. "No other bank has come close."
The Fed is to hold hearings in both Los Angeles and San Francisco today on First Bank's bid. Hearings on Wednesday and Thursday in Los Angeles will return to Wells Fargo's application.
