Seeking to reduce anxiety about their merger, officials from Norwest Corp. and Wells Fargo & Co. testified Thursday that it would benefit consumers, employees, and shareholders.

"We pledge to become the best financial institution in this marketplace and in every community we serve," Wells Fargo chairman Paul Hazen said at a Federal Reserve Board hearing on the deal, which was initially valued at $34 billion.

That means honoring Wells Fargo's existing 10-year, $45 billion Community Reinvestment Act pledge, maintaining Norwest's commitment to rural banking, empowering local managers to make reinvestment decisions, and being a leader in small-business lending nationwide, Mr. Hazen said.

Yet the deal was attacked by the Association of Community Organizations for Reform Now and some other activist groups. Acorn accused Norwest of saddling low-income and minority consumers with high interest rate, high- fee loans, rejecting minority applicants 3.5 times more often than whites for mortgages, and imposing excessive fees.

"Why reward this racist, classist performance?" said Marcia Erickson, chairwoman of Minneapolis Acorn. "What are your responsibilities to the American people? Do you have any?"

Marv Kamp, reinvestment coordinator for the Wisconsin Rural Development Center, said approval of the deal would insult the "citizens of Wisconsin and the nation."

He complained that Norwest has a 54% loan-to-deposit ratio in Wisconsin, lower than for other large banking companies and far below the 97% average for all banks in the state. "When a number of our community credit needs are unmet, a 40% investment in securities is unacceptable," he said.

Union leaders also blasted Wells Fargo for supporting a Colorado steel company that is using a line of credit from the bank to hire replacement workers during a strike. They threatened to withdraw all their funds-which they said exceed $200 million-from Norwest if the deal is approved.

They also touted a study purporting to show that Wells Fargo underserves low-income and minority communities. "This merger promises more expensive and less accessible banking services," said Mary Rosenthal, Minnesota state director for the national AFL-CIO.

Norwest president Leslie S. Biller said criticism of the banks' commitment to their communities is unfair. The merger will not cause the closing of branches in low-income areas, fees will remain competitive with those charged by other banks, and the new company will be a leader in community reinvestment lending, he said.

"When our communities succeed, we succeed," Mr. Biller said. "It is impossible to have a healthy bank in a struggling community."

There is no benefit to signing a national CRA pledge, as some activists have demanded, he said. "Our practice has been to set local goals rather than corporatewide goals because we believe the best community investment decisions are made in local communities by community bankers working with local community groups," he said.

He also tried to reassure activists that moving the corporate headquarters to San Francisco would not hurt lending or investments in the Midwest. "What matters is not where our corporate headquarters is but how we serve our customers locally, one at a time, when they walk into any of our 4,000 stores," he said.

Responding to concerns that the banks will have trouble converting their computer systems, he pledged a "flawless execution" that puts consumer needs above a speedy transition. Also, he said the deal will not affect year-2000 compliance efforts.

Many of the 70 groups testifying supported the deal, though some said they were worried about loss of the corporate headquarters. "We don't see this merger as a particular hindrance to what we are doing in our community," said George Dean, president of the Greater Phoenix Urban League.

Anne Haines Yatskowitz, president and CEO of ACCION New Mexico, a nonprofit micro lender, said Norwest has given it "tremendous support," offering office space, furniture, credit, and advice in setting up the program. She also praised Wells, which last year invested $200,000 in the enterprise. "This program would not exist without the support of these two banks," she said.

Robert Gnaizda, general counsel of the San Francisco-based Greenlining Institute, praised Wells Fargo's record of lending to minorities and small businesses, noting it has exceeded commitments made in 1990, 1993, and 1995. Also, the company is committed to hiring minority group members and women and to buying products from women- and minority-owned businesses, he said.

Just before the hearing, about 30 members of the Minnesota chapter of Acorn and the United Steel Workers protested outside the Federal Reserve Bank of Minneapolis, which hosted the hearing.

The protesters chanted "Norwest and Wells Fargo, Hey, Hey, Say No," and "Kovacevich, how'd you get so rich? Ripping off the poor. We won't take it any more." (The reference was to Norwest chairman Richard Kovacevich.)

They carried signs reading "Wells Fargo and Norwest: Two wrongs don't make a right," and "Stop Redlining: Community Reinvestment Now."

While chanting, they marched en masse into the reserve bank, a move that caused the number of police officers in the lobby to more than double in minutes. After circling the lobby, the group quieted down and entered the hearing room.

The Fed has held 10 hearings on megabank mergers, half of them this year. It has never rejected a merger after holding a forum. Dolores S. Smith, the Fed's director of consumer and community affairs, said the hearing was intended to elicit information on "financial issues, managerial issues, competitive issues, and the convenience and needs of the communities being effected." This includes their performance under CRA, she said.

The public comment period on the merger closed Thursday, though those who testified have until next Thursday to submit supplemental remarks. A transcript of the hearing will be available Wednesday on the Fed's Web site.

The new Wells Fargo would have 2,800 branches in 21 states, mostly west of the Mississippi. It would have $200 billion of assets, making it the seventh-largest U.S. banking company.

Speaking to reporters during a break in the hearing, Norwest's Mr. Biller characterized the tone of the meeting as "very, very positive." At least a few groups will protest a merger regardless of what the banks do, he said.

The companies paid for 20 people to travel to the hearing, Mr. Biller said, calling this standard practice for banks involved in these forums. "If you want community people to come in, you have to help them with travel expenses," he said.

The companies already have gotten inquiries from other banks interested in buying the $1 billion of deposits they must divest in Arizona and Nevada, he said. "We have had interest from community banks and out-of- state banks," he said. "It is both in-market players and out-of-market players."

He refused to name any of potential bidders and said Wells and Norwest have not yet decided which branches they will sell to satisfy government antitrust concerns in those two states.

Deposit runoff should be minimal, he said, but he declined to give an estimate. "I'd be disappointed to lose any customers," he said. "This new organization will be the best place in the country to do banking."

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