Responding to complaints by activists, the Federal Reserve Board is reviewing attempts by First Union Corp. to block community groups from protesting its future mergers.

At issue are so-called "no-protest" provisions included in community reinvestment deals First Union has struck with activists opposed to its merger with CoreStates Financial Corp. The provisions bar the activists from protesting most other First Union mergers for five years.

Regulators have generally let banks use these no-protest provisions, which are increasingly common in big-bank mergers. But the Fed appears to be reconsidering this hands-off approach. In a March 17 letter, it asked First Union for more details on its no-protest provisions.

"Please describe the terms of any provision that restricts the ability of any group or person to provide information to the federal banking agencies," wrote Shawn McNulty, the Fed's assistant director for consumer and community affairs.

Sources said the Fed is worried that the no-protest provisions could interfere with the agency's ability to determine whether deals serve the convenience and needs of the community. This is the legal hurdle all mergers must clear to win regulatory approval.

Although the CoreStates acquisition is not expected to be delayed as a result, the central bank may be prompted by the First Union no-protest provisions to issue guidelines curtailing their use, sources said.

Still, industry lawyers questioned whether the Fed needs to get involved.

"The Fed should not become concerned," said Francis X. Grady, a partner in the Rocky River, Ohio, law firm Grady & Associates. "I don't see every community group agreeing to sign such a pact."

Warren Traiger, a principal in the New York law firm of Butler, Fitzgerald & Potter, said no-protest pacts do not prevent community groups from responding to questions the Fed may ask to weigh a merger's effects. Also, he noted, the deals are not ironclad: No bank has ever sued a community group for breaching such a deal. "This really is not enforceable," he said.

"Ultimately, these no-protest requirements are meaningless," agreed Allen J. Fishbein, general counsel to the Center for Community Change in Washington, D.C. "Any bank that thinks it can become immune from protests is making a mistake."

The issue arose at a public hearing last month in Philadelphia on the CoreStates deal. Activists blasted First Union's use of the no-protest contracts, saying they deprive the community of its only leverage. Because First Union officials had already left the meeting, the Fed decided to send a written request for more information.

Responding to the Fed's letter, First Union assistant general counsel Daniel Glassberg wrote that activists "mischaracterized" the agreements.

"The limitations on comments do not apply to applications involving the acquisition of any branches in Pennsylvania," he wrote. "In other words, the community groups would be able to comment on applications involving their communities."

Activists also could comment during Community Reinvestment Act exams or on out-of-state mergers, he said.

Also, the deals are reasonable because the company "is seeking to prevent the situation where it is bound for a lengthy period of time but community organizations could nonetheless seek to require additional commitments," he wrote.

Mr. Glassberg's letter elicited a heated response from Matthew Lee, executive director of the Bronx-based Inner City Press/Community on the Move, who told the Fed in a March 24 letter that the company's arguments are "not true."

Mr. Lee said a deal First Union struck with a New Jersey group would bar all protests, including those involving acquisitions in the community. First Union proposed a similar deal with a Delaware group, he said.

Mr. Lee also questioned the relevance of being able to submit comments during CRA exams, noting that the Justice Department has ruled that regulators may only enforce the reinvestment law during merger reviews.

Finally, Mr. Lee urged the Fed to ban no-protest deals outright. "If the Fed does not, given the record, act on this issue, more banks will make these demands, and the Fed's processes will become a farce," he said.

Jane N. Henderson, senior vice president and director of community reinvestment at First Union, defended the deals. By voluntarily agreeing to a no-protest provision, she said, a group is able to shape the bank's reinvestment strategy in its community.

"We don't go and demand that groups sign an agreement with us," she said. "The groups came to us."

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