Richard J. Riordan is standing up for First Interstate again.
The mayor of Los Angeles has teamed up with the president of his city council to urge the Federal Reserve Board to reject Wells Fargo & Co.'s application to acquire First Interstate Bancorp.
The city "strongly opposes" Wells' bid for control of Los Angeles-based First Interstate, Mr. Riordan and Council President John Ferraro wrote in a letter dated Dec. 18.
The letter, filed during the public comment period that ended late last month, escalates the unusual level of political involvement in the battle over First Interstate.
Local politicians are typically silent about bank mergers, or else focus their energies on trying to minimize office closings and layoffs.
But Mr. Riordan and other prominent California politicians are openly supporting the deal that First Interstate prefers - a merger with First Bank System Inc. of Minneapolis.
Speaking at an outdoor rally in November, Mr. Riordan professed "love" for the chairmen of First Interstate and First Bank and said, "We look forward to working with you for many, many years to come."
The letter to the Fed details Mr. Riordan's reasons for opposing Wells' bid while putting California's largest city in the position of trying to influence federal policymakers.
The Los Angeles officials said consumer banking services in California would "be irreparably harmed" if San Francisco-based Wells bought First Interstate. They said Wells' plans to close hundreds of traditional branches and rely more on supermarket branches, automated teller machines, and personal computers would benefit the well-to-do at the expense of the poor.
Lower-income communities "are chronically underserved by most retail businesses, including supermarkets and banks," the letter said. "The residents of these communities cannot afford expensive home computers and often feel uncomfortable accessing ATMs in high-crime areas."
The writers also warned that competition would suffer, as it was "clearly diminished by the 1992 merger of BankAmerica Corp. and Security Pacific Corp."
"The proposed Wells Fargo/First Interstate consolidation would have a similar impact," the city officials said.
Raising concerns about broader economic impacts, Mr. Riordan and Mr. Ferraro said Southern California would sustain "the vast majority" of the 7,000 to 10,000 job losses from a such a merger - an especially cruel blow to Los Angeles County, where the 9% unemployment rate is already well above the national average.
Real estate markets would also suffer, they argued. First Interstate owns or leases nearly 1.3 million square feet in four major buildings downtown, an area where vacancy rates are high, at 20%. Office closures "could completely destabilize (the Los Angeles) real estate market, resulting in huge financial losses to owners and lenders throughout the country," the letter said.
Mr. Riordan and Mr. Ferraro also claimed that First Interstate would be a better corporate citizen as part of First Bank than as part of Wells.
"We have no doubt that Wells Fargo is prepared to make new commitments to Los Angeles as part of its pending application," they said. "But we are convinced that these commitments will inevitably fall well short of the service and community involvement that Los Angeles enjoys today from First Interstate Bank."
