Bank mergers draw community reinvestment concerns

By Donna Kimura

Many community development officials are eyeing the proposed merger of Bank of America Corp. and FleetBoston Financial Corp. with caution, while one key group is more upbeat about the prospects of the union.

In the wake of the announced merger, Bank of America pledged to lend and invest $750 billion for community economic development in the next 10 years.

The National Housing Conference (NHC) provided testimony in support of the acquisition. "Bank of America is a principal participant in the Federal Home Loan Bank Affordable Housing Program (AHP)," said NHC officials. "The bank's decision to retain a charter in the Northeast will enable it to expand its AHP activities in that area. In addition, the bank has consistently demonstrated a deep commitment to the future of public housing through its work with more than two dozen HOPE VI projects, providing debt financing, equity investments and developer services."

The merger would expand Bank of America's presence in the Northeast and create a banking giant that holds market shares throughout much of the country.

Several people working in community development, however, are more leery of the mega-merger despite the $750 billion pledge.

"I'm encouraged that they have a number, but I would be more encouraged if they had a plan," said Stella Adams, executive director of the North Carolina Fair Housing Center.

Adams said she would like to see a blueprint for how the bank will implement its community development efforts.

The merger is the first of two major consolidations pending in the industry. In January, JP Morgan Chase & Co. said it plans to merge with Bank One Corp., establishing the second-largest banking franchise in the nation based on assets of $1.1 trillion. Citigroup, Inc., holds the top post with $1.19 trillion in assets, and the Bank of America-FleetBoston union would yield the third largest bank at $966.4 billion, according to the Associated Press.

Bank of America's recent $750 billion pledge represents an expansion of the previous community development pledges of both Bank of America and FleetBoston. "Communities throughout our combined franchise will benefit from our shared tradition of public/private partnerships, community development and philanthropy," said Kenneth D. Lewis, the bank's chairman and CEO in a prepared statement. "This goal represents a floor and not a ceiling - there is no limit to the amount of lending and investing we will do to build and strengthen our communities."

Bank of America also announced that it would provide $1.5 billion in philanthropic grants over the next 10 years. On an annual basis, the goal represents a 40% increase over the combined charitable giving of both banks in 2003.

The $47 billion merger, which was announced last October, is pending approval by the Federal Reserve.

During a recent Federal Reserve Board hearing, representatives from a wide range of organizations voiced concern about the mega-merger, especially about how the corporation would maintain its local connections.

"Bigger is not necessarily better for communities," said Tanya Wolfram, research director for the Community Reinvestment Association of North Carolina. She said she hopes that Bank of America's recent pledge will mean more housing and economic development on a local level.

Chris Cole, regulatory counsel for the Independent Community Bankers of America (ICBA), also addressed the issue. "ICBA is concerned with the continued concentration of banking assets in the United States and the effect this concentration has not only on bank competition, but consumers, small businesses and communities," Cole said, noting that new, larger banks seldom provide the same commitment to the local communities that the acquired banks had. ICBA wants to see national banks examined locally under the Community Reinvestment Act (CRA) instead of through the bank's main office.

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