Community activists have launched an all-out assault against NationsBank Corp.'s $9.6 billion deal to buy Boatmen's Bancshares.

In hundreds of pages of protests, activists are urging the Federal Reserve Board to reject the Aug. 30 deal on fair-lending, Community Reinvestment Act, antitrust, and interstate branching grounds.

"It is a very schizophrenic record that they have," said Matthew Lee, executive director of the Bronx-based Inner City Press/Community on the Move. "They are a community development leader. We don't dispute that. But the one good field shouldn't obscure their other fields."

Joined by the Mid-South Peace and Justice Center in Memphis and the New Mexico Alliance, Mr. Lee's group charges that NationsBank steers minorities to higher-priced loans at NationsCredit Corp., a finance company affiliate.

NationsBank, whose lead bank scored an "outstanding" rating in its latest CRA exam, is fighting back. It has blasted the protesters in a series of letters and warns that they risk scaring banks out of the community development business.

"We are coming to a crossroads," said Catherine P. Bessant, senior vice president at NationsBank. "Community activists have to decide how they are going to treat people who are serious about community development."

"If we continue to see protests against institutions that have sterling records, there may well be a backlash," added James D. McLaughlin, director of regulatory and trust affairs at the American Bankers Association. "Some bank managers are going to say, 'What is the sense of seeking an outstanding rating? Let's do the minimum, and then we will just fight each protest as they come up.'"

Ms. Bessant said protests are causing senior officials to question why the institution tries to develop innovative programs, such as the no-down- payment, no-closing-cost mortgage for low-income borrowers that it unveiled early this year.

"This is very discouraging," Ms. Bessant said. "The organization devotes a lot of time and energy to community development, and yet nothing seems to convince people we are working on the same side of the fence."

Mr. Lee, however, defends his group's practice. "They appear to be breaking the law, and that is a problem for us," he said.

The protest filed by the three groups charges that NationsBank rewards employees for referring lower-income, predominately minority borrowers from the bank to the finance company, which charges higher rates. The finance company, however, does not refer well-qualified minority borrowers to lower-priced loans at the bank, Mr. Lee said.

The groups also accuse NationsBank of replacing branches in low-income areas with finance company offices. They also charge that the merger would give NationsBank too much control over the El Paso banking market and would violate interstate banking laws by giving it too much of the deposit base in Missouri and New Mexico.

Finally, the groups gave the Fed a state-by-state analysis of NationsBank's Home Mortgage Disclosure Act record. It showed that the bank consistently rejected minorities more often than whites.

In an point-by-point rebuttal submitted to the Fed on Oct. 31, NationsBank disputed the groups' allegations. NationsBank acknowledged that employees get bonuses for referring loans to the finance company. But it said they make even more money if the bank originates the loan. Also, it said all referrals are made without regard to race or gender.

NationsBank also said that it has not decided if it will close any Boatmen's branches. Also, it charges that the groups miscalculated the bank's share of the market in New Mexico and misapplied Missouri's law on deposit concentration. It also said that the groups do not understand HMDA data, noting that banks with greater outreach have higher denial rates.

"This is a rehashing of old statistical arguments that haven't held water before," Ms. Bessant said.

The Fed is expected to rule on the merger by yearend.

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