A Federal Re-serve Board hearing Friday gave community activists a chance to sound off against the First Union-CoreStates merger, but Sen. Arlen Specter made some of the loudest noise.
The Pennsylvania Republican, a consistent critic of the proposed $17 billion deal, won cheers of approval from the protesters by saying he might introduce a bill that would tie the hands of bankers hoping to close offices and otherwise cut costs in a merger's aftermath.
Branches could be closed only when "clearly redundant"-within two blocks in a city, a half mile in a suburb, and two miles in a rural area. Regulators would not be able to approve combinations that, in places with at least 250,000 residents, leave one company controlling at least 30% of deposits.
These ideas helped feed the spirit of an event typified by the statement of John Dodds, director of the Philadelphia Unemployment Project: "The time to stop this merger is now. Protect the men and women of Philadelphia," the base of CoreStates Financial Corp.
"If you approve this merger, you are approving of First Union's anticompetitive and predatory lending practices," said Lance Haver, director of the Consumer Education and Protective Association in Philadelphia.
Meanwhile, First Union Corp. president John R. Georgius recited the benefits the deal is supposed to bring. First Union's plan, which had been endorsed by some community leaders, called for $10 billion of small- business loans, $175 million in affordable-housing mortgages, $750 million in community development financing, and a net layoff total of 1,300.
"As we grow, so does the positive impact of what we can do," Mr. Georgius said at the beginning of a rare daylong public hearing that the Fed scheduled as part of its deliberations on the merger application.
"We have made enormous progress in trying to meet the needs of the community, wherever they may be," Mr. Georgius said, noting that First Union's nine banks recently received "outstanding" CRA grades.
Sen. Specter said the Charlotte, N.C., company's agreement with Philadelphia's biggest bank woke him up to the consequences of megamergers. He said he is "seriously considering" introducing a restrictive bill that he has circulated among lawmakers and industry officials.
He said he has assurances from the Senate Banking Committee chairman, Alfonse D'Amato of New York, that hearings would be scheduled on his proposal.
Sen. Specter also vowed to raise questions about banking industry mergers in forthcoming hearings of the Senate Judiciary antitrust subcommittee.
Prominent banking lawyer and merger expert H. Rodgin Cohen of Sullivan & Cromwell, New York, said under the Specter plan "virtually every deal the Fed has approved would have had to be rejected," include the mergers of Chase Manhattan Corp. with Chemical Banking Corp., BankAmerica Corp. with Security Pacific Corp., and Fleet Financial Group with Shawmut National Corp.
Before Friday, the Fed had called only three other public Community Reinvestment Act hearings in five years. They focused on the Chase- Chemical, Fleet-Shawmut, and Wells Fargo & Co.-First Interstate Bancorp deals.
Seven regulators were present in Philadelphia, including Fed Vice Chairman Alice M. Rivlin, Fed Community and Consumer Affairs Director Griffith L. Garwood, and Stephen Cross, deputy comptroller of the currency for community and consumer policy.
Mr. Georgius promised to preserve "convenient access" after 172 CoreStates branches are shuttered. Of 27 to close in low- to moderate- income neighborhoods, none will be more than 0.3 mile from a surviving branch.
First Union got a boost from Philadelphia Mayor Edward G. Rendell, who praised the bank for adding more than 800 high-paying jobs in the city.
Charleston, S.C., Mayor Joe Riley Jr. lauded First Union's community development efforts in his city, saying, "First Union is not just a corporation following CRA. (It) believes in CRA."
But Pennsylvania legislator Andrew J. Carn said he sees an antitrust violation in First Union's control of 45% of Philadelphia deposits. He wants, "at a minimum," $5 billion of assets sold.
U.S. Rep. Jon D. Fox, R-Pa., also considering legislation in response to the sale, said, "The jobs issue for us is paramount. For laid-off workers, the unemployment rate is 100%."
"Poor people know what happens when banks close," said Yvette Long of the Philadelphia Welfare Rights Organization. "They don't come back."
Francine Gordon, director of the Mid-Florida Housing Partnership, defended First Union, saying it worked with her group to make $3 million of mortgages and establish a small-business incubator.
"I cannot think of one instance where we asked for their help and they did not give it," said Judi Booe, a staffer at the Warren County Housing Commission, Front Royal, Va. (First Union said it paid for such nonprofit supporters' travel to the hearing.)
