In what may put more pressure on banks to expand lending to low-income groups, a coalition of California civil rights and business groups on Monday asked regulators to block Wells Fargo Bank's proposed acquisition of American National Bank because of Wells' alleged failure to follow equal opportunity employment and lending practices.
The complaint is among a growing number of challenges of bank mergers by community groups nationwide under the federal Community Reinvestment Act. The 1977 law allows regulators reviewing bank mergers to consider whether those financial institutions are making loans and providing credit in the neighborhoods where their depositors live.
In an 11-page letter sent to the federal Office of the Comptroller of the Currency--which regulates national banks including Wells Fargo--the Latino Issues Forum, Black Business Assn. of Los Angeles and 24 other groups complained that Wells Fargo has a poor record of lending to low-income and minority groups because the bank favors risky "leveraged buyouts at the expense of (meeting) community needs."
The group, which asked the Comptroller to conduct an audit of Wells Fargo and hold a public hearing on its claims, also alleged that Wells is the only major California bank that has no blacks, Asians or Latinos on its board and that only three of its top 125 managers are minorities.
San Francisco-based Wells Fargo acknowledged that it currently has no minorities on its 15-member board and analysts say it is one of the largest lenders to highly leveraged transactions in the nation--with about $3.1 billion in leveraged buyout loans outstanding in 1988.
But Betty Lattie, a Wells Fargo vice president in San Francisco, said the coalition was citing erroneous and misleading figures to bolster its claims.
Lattie said leveraged buyout transactions financed by Wells Fargo represent less than one-tenth of the bank's $37.7-billion loan portfolio. She also said that Wells Fargo has had minorities on its board in past years and currently has more than three minorities among its 125 top managers.
"It is not in our interests to be against California," Lattie said. "It's in our interest to meet community needs."
Wells Fargo, the state's third-largest bank with $48 billion in assets, has been buying smaller banks recently as it seeks to expand in California through acquisitions. In September, it agreed to acquire American National Bank for about $160 million. American, which is owned by Central Pacific Corp. of Bakersfield, has 28 branches from Modesto to San Bernardino.
Knowledgeable federal regulators could not be reached for comment Monday. But in recent months, a number of protests similar to the one filed against Wells Fargo have been lodged against First Interstate Bank, Security Pacific Bank and other banks across the country by various community organizations.
Most of the complaints, which have met with mixed success, have relied on community service provisions of the Community Reinvestment Act to try to persuade banks to increase services and lending to minorities and those with low incomes.
The protests recall the citizens activist movement that enveloped the nation's broadcasters after former Federal Communications Commission member Nicholas Johnson wrote a book in 1970 called "How to Talk Back to Your Television Set." The book, which criticized stations' alleged failure to broadcast in the public interest, prompted dozens of challenges to television and radio broadcast licenses by civil rights and community groups.
Such grass-root protest movements waned in the 1980s during the climate of federal deregulation encouraged during the Reagan Administration. But in recent years, with increased nationwide concern over issues such as housing, the environment and drug safety, citizen groups have again turned to federal regulators for help, especially in encouraging banks to lend to low-income consumers and do more to finance community redevelopment.
"They have discovered a new weapon," said Joe Belew, president of the Consumer Bankers Assn., a suburban Washington trade group that represents large retail banks such as Wells Fargo. "I'm very concerned, and I think the entire industry is concerned, that the CRA act is being misused."
In February, for example, the Federal Reserve Board turned down a request by Continental Illinois National Bank of Chicago to buy a small bank in Arizona after the Amalgamated Clothing and Textile Workers Union used the Community Reinvestment Act to challenge Continental's alleged failure to serve low-income residents. In blocking the merger, the Fed said Continental "did not have a plan" for complying with the act and "made no significant effort to ascertain the credit needs of its communities."
More recently in October, the Fed delayed action on the proposed merger between Charlotte-based First Union Corp. and Florida National Banks of Jacksonville after the Charlotte Reinvestment Alliance picketed First Union headquarters, claiming that just 5.8% of the bank's mortgage loans went to minority groups representing 21.8% of the area's population.
The protests were dropped Monday after First Union announced that it would provide $9 million in mortgages and business loans to low-income neighborhoods in Charlotte.