Wells Plans Huge Inner-City Commitment : Banking: The $45-billion lending proposal is seen as an effort to win favor for its takeover bid for First Interstate.
Upping the public relations ante in its hostile takeover bid for First Interstate Bancorp, Wells Fargo Bank is expected to announce today a commitment to lend $45 billion over 10 years for low-income housing, minority and inner-city economic development and small-business loans if the merger goes through.
While clearly an attempt to curry favor with the public and banking regulators, the commitment is believed to be the largest commitment ever by a U.S. bank to lending under the Community Reinvestment Act (CRA), the 1977 federal law that requires banks to lend money in disadvantaged areas.
Wells Chairman and Chief Executive Paul Hazen discussed the commitment with about 30 members of the Greenlining Coalition at a meeting at West Angeles Church of God in Christ in the Crenshaw district on Wednesday. The Greenlining Coalition is a community group that advocates increased lending in inner-city and minority communities.
Hazen was expected to affirm the commitment in a letter to be sent today to Federal Reserve Chairman Alan Greenspan and other Fed board members.
“To our knowledge, this CRA commitment is the largest-ever proposed by any U.S. bank,” Hazen said in a draft of the letter obtained by The Times.
If the bank goes through with its plans, the money would be spread throughout 13 states in the Western U.S., with about 70% in California.
“I don’t know of any group that has obtained a commitment of this size from a chairman of the board,” said Paul Turner, a member of the Greenlining Coalition and director of economic development for West Angeles Church’s nonprofit community development organization.
While praising the commitment, others remained concerned about the fallout if the merger goes through.
Some observers suspected that Hazen’s appearance was part of an effort to defuse community opposition for Wells’ bid, particularly in neighborhoods that may be adversely affected by merger-related branch closures.
Wells will relocate 350 of First Interstate’s 428 branches if the acquisition is allowed, sources said.
“We are against any premature closing of branches,” Turner said. “Minorities and women often staff these branches and they would be disproportionately affected.”
Wells spokeswoman Kathleen Shilkret said it was inappropriate to discuss such issues in the context of the reinvestment commitment.
First Interstate representatives declined to comment.
Turner said Hazen probably believes that such commitments might also help Wells win shareholder and regulatory approval.
Alan Fisher, executive director of San Francisco-based California Reinvestment Committee, a coalition of groups that works for increased lending in poor communities, said Hazen’s appearance was designed to circumvent efforts to hold hearings and extend the public comment period on Wells’ offer. The committee wants the Federal Reserve Board, which must approve the merger, to extend the comment period beyond the Dec. 22 expiration date.
In any case, the $45-billion, 10-year commitment would mark a significant increase over Wells’ current commitment, made in 1993, to lend $5 billion over 10 years in such loans, Shilkret said. Wells has already lent $4.6 billion of that earlier commitment, she added.
The $5 billion represents about 1% a year of Wells’ current assets; the $45-billion would represent about 4.5% a year of the combined banks’ assets, Fisher said. By comparison, Chase Manhattan Bank--which currently has the highest community reinvestment commitment--has committed $18 billion in lending over 10 years.
Some details of the program include:
* $25 billion is slated for small business loans.
* $300 million will be earmarked for charitable contributions, 75% of which will go to organizations that benefit low-income residents.
* Wells will commit to awarding 40% of its contracts to women-, minority- and disabled-owned businesses.
* The bank will commit to expanding its presence in inner-city neighborhoods, in part by expanding its presence in supermarkets.
Wells has already won praise from the Greenlining Coalition and others for being one of the first banks to make reinvestment commitments, and it is already one of the largest small business lenders in the nation.
Last year, it withdrew from a consortium of banks that had come together in the wake of the 1992 riots to establish a $100-million community development fund to make loans to small businesses.
Shilkret said the bank felt it could use the money more efficiently in other programs.
Hazen’s pledge came on a day that First Bank System Inc., which is also bidding for First Interstate, escalated its takeover effort, accusing Wells of misleading investors to drive up its stock price.
First Bank and Wells Fargo are both offering stock for First Interstate, and Wells’ share price has been slowly rising while First Bank’s has stalled.
At Wednesday’s share price, Wells’ offer was worth exactly $1 billion more than First Bank’s--$11.4 billion, or $147.17 per 0.67 share of First Interstate stock, compared with First Bank’s $10.4 billion, or $133.90 per 2.6 shares.
Wells shares rose $1.25 to $220.75; First Bank eased 12.5 cents to $51.50. First Interstate jumped $2 to $141. All trade on the New York Stock Exchange.
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First Bank said deceptive projections about potential earnings from interest and fees had artificially pushed up the price of Wells’ shares.
“We think this is a serious violation of the exchange offer rules,” Richard A. Zona, First Bank’s chief financial officer, said in a telephone interview from the bank’s Minneapolis headquarters.
Zona said First Bank already has written a letter of complaint to federal securities regulators about Wells’ alleged misrepresentations. He said a lawsuit is also being considered.
“Last week we told investors what we are doing right now, and it was all factual,” Wells Fargo spokeswoman Daphne Larkin said Wednesday.
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Times Correspondent Valencia Roner and the Associated Press contributed to this report.
