Wells to Offer $45 Billion for Ecomonic Development : Banking: The 10-year commitment to loan money is seen as an effort to win favor for its bid for First Interstate.
In an apparent effort to win favor for 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 businesses if the merger goes through.
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.
He was expected to affirm the commitment in a letter to be sent today to Federal Reserve Board Chairman Alan Greenspan and other Fed board members.
“To our knowledge, this [Community Reinvestment Act] 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, it would mark one of the largest reinvestment commitments ever made by a U.S. bank, community advocates said. The money would be spread through 13 states in the Western U.S., although about 70% of the amount would be lent in California.
“If you get a chief executive or chairman to agree to something, I believe that is a genuine proposition,” 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 said they remain concerned about the fallout should the merger go through.
“Our concern is that the commitment is not specific enough in terms of the actual lending and does not specifically address the structural issues” a merger of Wells and First Interstate would present, such as layoffs and branch closures, said Alan Fisher, executive director of San Francisco-based California Reinvestment Committee, a coalition of groups that works for increased lending in poor communities.
“We are against any premature closing of branches,” Turner added. “Minorities and women often staff these branches, and they would be disproportionately affected.”
Hazen said Wells would relocate 350 of First Interstate’s 428 branches if the acquisition is allowed, sources said.
Wells spokeswoman Kathleen Shilkret said it would not be appropriate to discuss such issues in the context of the reinvestment commitment.
A $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 scheduled for small business loans.
* $300 million would 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 businesses owned by women, minorities or disabled people.
* The bank will commit to expanding its presence in inner-city neighborhoods, in part by expanding its presence in supermarkets.
Wells won praise for being one of the first banks to make reinvestment commitments.
But it also withdrew last year 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 believed it could use the money more efficiently in other programs.
Hazen’s pledge came on a day that First Bank System Inc. of Minneapolis, which is also bidding for First Interstate, intensified 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 as 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.
In New York Stock Exchange trading on Wednesday, Wells shares rose $1.25 to $220.75, First Bank eased 12.5 cents to $51.50, and First Interstate jumped $2 to $141.
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. “The facts demonstrate that Wells Fargo is generating revenue. This is a sophisticated audience and the market is reacting accordingly.”
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Times correspondent Valencia Roner and the Associated Press contributed to this report.
