Corps of Activists Puts Heat on Banks : Success at California First Contrasts With Battles Elsewhere

The assault on First Interstate started about 3 p.m. one Friday last September. Without warning, pickets showed up outside its banks in Albuquerque, N.M., Denver, Oakland, Phoenix and Seattle.

The marchers, carrying signs protesting lending policies, were from Acorn (the Assn. of Community Organizations for Reform Now). The picketing was the opening salvo in a confrontation between the activist group based in Little Rock, Ark., and the nation’s ninth-largest banking company.

Acorn is one of a number of organizations across the country using the federal Community Reinvestment Act to try to persuade banks to increase services and lending to members of minorities and low-income people. The 1977 law requires financial institutions to make loans and provide credit--not just collect deposits--in the neighborhoods where their depositors live.

Regulators are supposed to consider an institution’s compliance with the act when deciding on a proposed merger or acquisition, which provides the activists with a leverage point for negotiations to gain concessions from the banks.

Advocates say the agreements have helped arrest decay in urban areas by causing banks to institute lending policies that allow working-class families to retain a foothold there.

Peace and Praise

The biggest victory yet for the activists came Thursday when California First Bank of San Francisco said it would provide $84 million in loans for minorities and low-income people, increase its recruitment of minorities and women and offer free checking accounts for low-income consumers. The agreement helped smooth the way for the bank’s proposed acquisition of Union Bank in Los Angeles.

The agreement was also notable for the harmony that led up to it. There were no pickets or protests, and the three coalitions, including Acorn, representing 90 community groups had nothing but praise for the executives at California First.

“We did not approach this with a great deal of optimism,” said James D. Jefferson, president of the San Francisco Black Chamber of Commerce and a member of another coalition in the talks. “It was a lively exchange of viewpoints, but it was always very polite and professional. And the results were far beyond our expectations.”

Japanese-owned California First used its non-Japanese executives and some lawyers to negotiate deals with Acorn and two other coalitions, one led by Robert L. Gnaizda, a lawyer from a San Francisco firm called Public Advocates, and another led by Stephen Ronfeldt, a Legal Aid Society lawyer.

It was very different for Acorn and other groups last year in dealing with First Interstate, the Los Angeles-based bank holding company.

“Our bottom-line strategy is confrontational,” said Elena Hanggi, a past national president of Acorn who now works on its staff. “In the banking campaign, we have used negotiations more. But we will never give up our ability to rely on confrontation because it is very often that direct action or that perceived threat that gets people to the negotiating table in a serious way.”

Tactics Vary

The confrontation can take several forms, ranging from picketing to jamming an office building with so many people that work is impossible. Two years ago, nine people were arrested when several hundred Acorn members crowded into the offices of the American Bankers Assn. in Washington to demand low-cost checking and more loans for people and businesses in poor areas.

Sometimes the tactics work. In 1986, Boatmen’s National Bank in St. Louis signed an agreement to invest $50 million a year in home loans for residents with low incomes. Fidelity Bank in Philadelphia agreed to provide $40 million in loans over two years, along with a $20,000 grant to Acorn.

In Chicago, another organization, National People’s Action, persuaded three big banks to provide $173 million in loans to poor neighborhoods.

Even more than most businesses, banks hate bad publicity. So the brass at First Interstate was miffed by the surprise appearance of pickets after the announcement of its plan to acquire Allied Bank of Houston last summer.

Other groups had already announced their intention to protest the acquisition, but the pickets were the first public display of anger and the first the bank had heard of Acorn’s role.

“The reaction of most people around the banking organization was not good to that kind of start,” said William J. Bogaard, general counsel for First Interstate.

Different Versions

At the first meeting with Acorn a few days later in Phoenix, bank officials learned that the organization wanted a broad list of concessions that would cover the company’s subsidiaries in 12 Western states.

“Here they had First Interstate, with banks in 12 states, going into a 13th state and they thought they could accomplish a program that would cover half the United States,” said Bogaard, chief negotiator for the holding company. “We were circumspect about that strategy. We have a policy that our banks have primary responsibility for running their individual affairs.”

There was a second session in Los Angeles that both sides agree was polite and relatively unproductive. But they differ over what occurred after that.

Bogaard said Hanggi was supposed to call him back in response to the discussions and she never did so.

Hanggi said First Interstate promised a written counterproposal to the demands of Acorn and other organizations involved in the campaign and never did so.

“It became real clear that they were simply trying to stonewall the whole process and get through the application procedure for the merger without doing anything for any of the groups they were negotiating with,” said Hanggi.

In the end, the acquisition was approved without any formal response from First Interstate, although Bogaard said the company did institute some of the suggestions from Acorn and worked with other organizations. Bogaard also said First Interstate has always been found by regulators to be in compliance with the requirements of the Community Reinvestment Act.

But the advocates are not satisfied. “The word is out on First Interstate, and they’ll be filing another application one of these days,” said Hanggi.