NationsBank, BankAmerica Challenge Critics on CRA

Arguing that they have the strongest community reinvestment records in the country, the chairmen of NationsBank Corp. and BankAmerica Corp. lashed out Thursday at opponents of their $60 billion merger.

Testifying at a Federal Reserve hearing, NationsBank chairman Hugh McColl said the banks reaffirmed their commitment with their recent $350 billion Community Reinvestment Act pledge. It includes $180 billion in small-business loans and $115 billion for affordable housing.

Community activists have criticized the pledge because it does not specify how much particular communities would get-a response that Mr. McColl scoffed at.

"Our outstanding record of achievement, accountability, and public reporting of results demonstrates that CRA agreements and itemized commitments are unnecessary for our company," Mr. McColl said.

"They are unwarranted. They are burdensome to manage. They divert resources from areas most in need. They prevent us and our partners in meeting the changing needs of our communities. In short, they are not in the best interest of underserved neighborhoods."

BankAmerica chairman David A. Coulter said the Fed would be sending a bad signal to banks if it rejects a deal involving two companies with "outstanding" CRA ratings.

"Allocating the resources and performing at a level to achieve 'outstanding' ratings is very, very important," Mr. Coulter said. "We believe it is equally important to reward banks by placing value on their 'outstanding' ratings at times like this."

The chairmen's comments inflamed opponents of the deal, who testified later in the day that the merger would hurt consumers and low-income communities throughout the country.

"We will close down their branches and ensure they fail in California," said Mario Obledo, chairman of the California Coalition of Hispanic Organizations. "This is going to be a street fight and we are prepared to engage in it."

The proposed merger of NationsBank and BankAmerica, the nation's 3d and 4th largest banks, has provoked such fierce reactions in California since it was unveiled April 13.

Though the combined entity would retain the BankAmerica name, its headquarters would move from San Francisco to NationsBank's hometown of Charlotte, N.C., and Mr. McColl would take the reins. The companies hope to close the deal Oct. 1, creating a $570 billion-asset company.

To drive home their opposition, activists waved placards reading, "NationsBank Go Home," "Keep Your Money at Your Home, Not at Hugh McColl's Home," and "Don't Redline California." They did not, however, disrupt the forum as other activists did at recent hearings on the Citicorp-Travelers Group and First Union Corp.-CoreStates Financial Corp. mergers.

Angelique Campbell, director of the Texas Community Reinvestment Coalition, said NationsBank does little to meet the credit needs of minorities in Texas. For instance, the bank holds 14.5% of all deposits in San Antonio but made only 1.7% of all home loans in the largely Hispanic city.

Most of the opponents demanded that the Fed require the banks to provide more details on their CRA pledge.

Alan Fisher, executive director of the California Reinvestment Committee, argued that the combined institution is likely to lose focus on its commitment to the Golden State. To avoid this, the new BankAmerica must include specifics in its CRA commitment, he said.

"From the altitude of $570 billion, will such a monolithic institution even see local communities?" Mr. Fisher said. "There needs to be a specific CRA commitment by NationsBank to California."

Yet the focus of community activists' concern was not solely on California. Stella Adams, a representative of the North Carolina Fair Housing Center, said Mr. McColl's merger spree in the past several years has reduced NationsBank's focus on its home state.

"NationsBank's expansion west has reduced its commitment at home," Ms. Adams said. "Our neighborhoods in North Carolina have become insignificant."

She likened the banks' CRA commitment to a shotgun blast.

"Instead of precision and planning, he (Mr. McColl) has opted for a scattershot approach," Ms. Adams said. "NationsBank's commitment to community reinvestment is all smoke and mirrors."

Others said that without a more specific CRA commitment, regulators will have a difficult time discerning whether the merged institution is keeping its $350 billion promise.

"We don't see how the Fed could truly review the impact of this acquisition," said Earl Lui, an attorney with Consumers Union.

The banks garnered significant support from housing and economic development groups, many of which are involved in redevelopment programs with at least one of the two institutions.

"The $350 billion community reinvestment program put forward by NationsBank-Bank of America is unprecedented and will ensure that individuals and communities that have been denied access to credit will now have access to funds they can afford," said Bruce Marks, executive director of the Neighborhood Assistance Corp. of America, which is based in Boston.

"I'm in favor of the merger and would like to see it proceed," said Duane McClurg, president of Dallas City Homes, a housing group that has worked closely with NationsBank to revitalize Texas communities.

Christopher J. Smith, chairman of William C. Smith & Co., praised NationsBank for financing a massive redevelopment project in a low-income Washington, D.C., neighborhood, which resulted in the creation of 410 town houses, retail space, and a community center. "It was a project no other lender would touch," he said.

This is the eighth hearing the Fed has held on a megamerger. Dolores S. Smith, the Fed's director of consumer and community affairs, said the point of the forum is to gauge the deal's impact on the public. "These include financial issues, managerial issues, competitive issues, and convenience and needs of the communities affected," she said. "We are particularly looking at their record under the Community Reinvestment Act."

The public has until July 17 to submit comments to the Fed on the merger, which will create the first coast-to-coast bank, with 5,000 branches and 15,000 automated teller machines.

The hearing concludes today. More than 200 witnesses are expected to testify.

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