The Public Good and Bank Mergers : Huge deal is causing anxiety on several fronts

Anxiety is prevalent in many parts of Southern California a day after Wells Fargo & Co. cinched a deal to acquire First Interstate Bancorp, the last major bank headquartered in Los Angeles. If the merger goes through as expected, gone will be 7,000 to 8,000 jobs in California and 350 of the two banks’ 1,386 retail outlets in the state.

The fear is that Wells Fargo, which will become the country’s eighth-largest bank, will leave many communities without branches and access to loans, especially poor neighborhoods. The company is known as a cost slasher and no big proponent of branch banks.

The challenge for Wells is to pursue its corporate strategy as it enhances its standing as a corporate citizen. The San Francisco-based bank has pledged $45 billion over the next 10 years to investment in poor and minority communities across the western states, most in California. But a good deal of the business of banking has to do with building personal relationships and community ties. Wells has been putting outlets in supermarkets instead of establishing traditional branches. That may work well in suburbs, but in inner-city neighborhoods, which have few supermarkets, outlet banking may pose a hardship.

In areas of L.A. County with poverty levels greater than 20%, First Interstate has more branches than Wells Fargo, according to Linda Griego, president of RLA (formerly Rebuild L.A.) and also a member of the First Interstate board of directors. There is not much overlap among the branches of the two banks, so closure of the First Interstate branches would leave a big void. Community investing is not just monetary; it is reflected in presence and accessibility.

Beyond the business of banking, both Wells Fargo and First Interstate contribute to various charities directly and through their foundations. First Interstate has five foundations, with the biggest one in Los Angeles. The personal involvement of corporate leaders makes all the difference in philanthropy. So when Los Angeles loses a major company, that sometimes adversely affects corporate philanthropic contributions.

Wells will assume and continue operating the First Interstate foundations, but will it put an equal emphasis on Southern California? Wells officials have said they will establish dual headquarters, one in Los Angeles, the other in San Francisco. We encourage that kind of community responsibility. We welcome the bank’s expanded role in Southern California. We will watch its commitment to this region.

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Bank Branches

Proportion of Los Angeles County branches located in poor communities:

First Interstate: 21%

* Breakdown: 21 of 100 branches

*

Wells Fargo: 9%

* Breakdown: 19 of 211 branches

Source: Rebuild of Los Angeles