official who warns of dire economic consequences if the Minneapolis-based company merges with First Interstate Bancorp. The official, Commerce Commissioner James Ulland, has accused First Bank of "blatant misrepresentation" in saying that few jobs will be lost and that corporate headquarters will remain in Minneapolis. "There are going to be severe (job) cuts here, and they are going to move the headquarters if the deal goes through," Mr. Ulland said in an interview. "They aren't being honest with Minnesotans." First Bank vice chairman Philip Heasley hit back, saying Mr. Ulland had "a minimal amount of knowledge" about the proposed merger. He also reiterated that the headquarters would remain in Minnesota, where First Bank employs more than 6,000. The bad blood in Minnesota contrasts starkly with the mood in Los Angeles, where Mayor Richard Riordan recently led a public rally in support of a First Interstate-First Bank combination. It is viewed as more likely to preserve jobs - and a strong administrative presence in Los Angeles - than Wells Fargo & Co.'s unwelcome bid for First Interstate. Moving First Bank's base to Los Angeles, Mr. Heasley said, would cost more than $50 million and "would be so far out of our pattern of behavior that I don't know how anybody can justify such a statement." "We've done 23 acquisitions in the past four years, and each one has had a positive impact on the Twin Cities," he added. "This is more likely to result in a net increase of people (in Minnesota) because the headquarters is there, rather than a net decrease." Mr. Ulland - a former First Bank lending officer who lost his job in a 1990 management shakeout - is not alone in his suspicions about the bank's intentions. One local money manager, who asked not to be identified, called First Bank's recent pronouncements "spin control, plain and simple ... They're doing it so that people in Minnesota don't get up and protest." Critics point out that the merged, multistate company would have more assets in California than in Minnesota, and that First Interstate shareholders would own about 58% of the stock. Officials from the two banks estimate the marriage would enable them to slash annual expenses by about $500 million. Much of that savings would come from the elimination of about 6,000 jobs. The prospective partners have said responsibility for most major bank functions - including the corporate and private banking, payment systems, investment management, retail, and trust businesses - would be centered in Los Angeles. As Mayor Riordan said recently, the merger would mean "that one of the nation's largest, premier banks will continue to run its core business operations in Los Angeles." "The headquarters always goes where the action is, and the action would definitely be in Los Angeles," said Al Olson, president of the Independent Community Bankers of Minnesota. "It's already evident," said Paul Bees, a banking division vice president for the executive search firm Robert Half International. "All of the decisions are being made out in Los Angeles." First Bank chief executive John Grundhofer, who would be the post-merger CEO, is a Los Angeles native, owns a home in the area, and has reportedly been itching to return to California since arriving in Minneapolis from Wells Fargo in 1990. Mr. Grundhofer has given Commissioner Ulland and Minnesota Gov. Arne Carlson assurances that the headquarters would remain in Minneapolis. "But both calls have come from Los Angeles," Mr. Ulland said. "Actions speak a lot louder than words." Mr. Heasley termed such a conclusion "ridiculous," saying First Bank System's entire current management team, from finance and planning to public relations, is based in Minneapolis. "We have a brain trust that we hope will be together for a long time," he said. "The theory is that Jack (Grundhofer) will forget every piece of discipline he ever had ... and say, 'You're history, because I've got a summer house in California. That's not going to happen." Bank officials have given detailed projections of staff reductions in various areas: 2,281 positions in operations, 448 in data processing, 1,837 in retail banking, and 848 at staff and executive levels. Mr. Heasley said there would likely be job cuts in all 21 states, but he said he didn't know how many there would be in Minnesota. He noted the two banks have overlapping retail territory only in Colorado, Wyoming, and Montana. "They have every reason not to be forthcoming about what they are planning for the Twin Cities, because of the potential reaction," said John Boyd, a banking professor at the University of Minnesota. But, he added, "I frankly wouldn't expect the employment impact to be too much." Mr. Boyd and others say First Bank's back room operations in the Twin Cities are high-tech and among the industry's most efficient, which would bode well for employees. But one area banker familiar with the situation said that the company's senior-management ranks in Minnesota are expected to be hit hard by the merger. While it has been announced that Mr. Heasley and First Bank vice chairman Richard Zona have secured spots with the merged organization, the futures of such high-ranking executives as vice chairman Bill Farley and First Trust chairman John Murphy appear up in the air. The area banker said both executives have been told they will be released if the acquisition is completed. When asked if that is true, Mr. Heasley said, "I don't know that. There's still a question mark." But he acknowledged, "You have two sets of headquarters, two sets of staff, and you won't end up with that many." Mr. Ulland said any loss of senior managers could be painful. "Those people are of substantial benefit to the community," he said. "They make the philanthropic decisions. They pay taxes. They are important parts of the leadership fabric of the community." Lower-level First Bank employees, who requested anonymity, were mixed in their appraisal of the situation. One retail banker said it would be better to be the acquirer than the acquiree. "With all the consolidation, it's a matter of who's going to buy whom," she said. "Most people think it's better if First Bank is the buyer." But a data processing employee said some people are clearly worried about their jobs. "They have a lot of time invested with this company and they have seen what has happened (with First Bank job cuts) in other places," the employee said. "They don't want that to happen to them." Mr. Bees of Robert Half said he has received several calls from distraught First Bank executives worried about job security. But he added it is too soon to tell how the job cuts will shake out. "The numbers are going to go down," he said. "But we don't know yet exactly how or where." Minnesota community bankers may stand to gain the most from an acquisition. Mr. Olson said bank customers often are angered by the callousness of merger-related job cuts and related organizational chaos. He said members of his community banking association have been getting calls from disgruntled First Bank customers. "This is a tremendous opportunity for the small banks I represent," he said. "The more turmoil and change that takes place in these huge financial institutions, the more business comes to community banks." Regardless of what happens, the last two weeks have delivered a wake-up call to a region that - as home to $33 billion-asset First Bank System and $71 billion-asset Norwest Corp. - has mostly benefited from banking's consolidation wave. "There has always been a certain complacency in Minnesota that Norwest and First would always be here, that the real competitive world would pass us by," said Mr. Olson. "Now we're seeing that may not be so." Mr. Engen is a freelance writer based in Minneapolis.

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