Chemical, Hanover Pledge $750 Million in Lending
Chemical Banking Corp. and Manufacturers Hanover Corp. pledged on Friday to lend $750 million for housing, small business development, and nonprofit organizations over the next five years.
The two New York banks, scheduled to merge at the end of this year, thus join a wave of big banks that are making major promises to pacify community activists who have threatened to oppose the mergers.
The new Chemical's announcement came one day after Bank of America and Security Pacific Corp. increased their community lending pledge to $12 billion, from $9 billion, over the next 10 years. The two banks plan to merge early next year.
Similarly, NCNB Corp. and C&S/Sovran in August pledged $10 billion in community lending over 10 years to to smooth the way for their merger.
In light of those commitments, the Chemical pledge seems somewhat weak.
"It's not the proposal that we made," said Nikos Valance, an adviser to the Association of Community Organizations for Reform Now, or Acorn. "It's much lower than we requested."
Acorn had asked Chemical and Manufacturers to provide $10 billion in loans and grants over 10 years. The group continues to meet with bank officials to press for more.
"We're comfortable that this is an appropriate number for the new Chemical bank," a spokeswoman for Hanover said.
Chemical said that when the new amount is added to all forms of lending to poor and moderate-income consumers, the commitment totals $2 billion over five years. Communities in New York, New Jersey, and Texas are included.
Activists Win Skirmish
The community groups, meanwhile, won a minor battle in Washington regarding the Chemical merger. On Friday, the Federal Reserve Board decided to extend by one month - until Nov. 22 - the comment period on their merger. Community groups had requested the extension to better prepare.
Hanover and Chemical's pledge includes new loans and grants for multifamily housing and mortgages on 1-to-4 family homes, loans to very small businesses, and loans to nonprofit organizations.
One bank community reinvestment officer, who asked not to be identified, said the new Chemical pledge "sounds a little chintzy to me."
However, the bank's commitment is three times larger than one that Manufacturers ballyhooed at its annual shareholders' meeting in April. Chemical had not previously announced a specific figure.
Both banks noted they have received the highest reinvestment-act rating from the New York State Banking Department.