Job Losses and Community Reinvestment Plans: Contrasting Responses to Bank Mergers

Strategic Insights -

A recent surge in criticism from Philadelphia-area advocacy, church, and consumer groups regarding the impending job losses resulting from First Union Corp's acquisition of CoreStates Financial Services has sparked a distinct contrast to the more subdued response to the NationsBank purchase of Barnett Banks Inc. While 8,000 jobs are expected to be eliminated and hundreds of branches closed in the CoreStates deal, similar concerns raised about NationsBank's acquisition of Barnett Banks in Florida were met with relative calm, with state and federal regulators receiving only a few dozen letters.

In response to the Philadelphia-area backlash, First Union has announced a community reinvestment plan valued at over $1 billion over the next several years, aimed at supporting low-income mortgages, community development, and small business lending. This plan joins a previous commitment of $85 million in contributions over five years, a $100 million endowment for a charitable foundation, and a $16 million re-training fund.

Key Takeaways:

  • 8,000 jobs are expected to be eliminated as a result of First Union Corp's acquisition of CoreStates Financial Services.
  • Hundreds of branches will be closed as a result of the merger.
  • First Union's community reinvestment plan targets low-income mortgages, community development, and small business lending, valued at over $1 billion over several years.
  • The plan complements previous commitments of $85 million in contributions over five years, a $100 million endowment for a charitable foundation, and a $16 million re-training fund.
  • Philadelphia-area advocacy, church, and consumer groups are criticizing the merger, while a similar deal in Florida was met with less opposition.
  • NationsBank has established a new scholarship fund for people with disabilities, awarding $100,000 annually to eligible students.

Statistics:

  • 8,000 jobs will be eliminated as a result of the merger.
  • Hundreds of branches will be closed as a result of the merger.
  • First Union's community reinvestment plan is valued at over $1 billion.
  • $85 million will be contributed over five years.
  • $100 million will be endowed for a charitable foundation.
  • $16 million will be allocated for re-training.
  • 7,000 checks have been microwaved to dry out wet paper at AT&T Universal Card Services' processing center.

Sources:

  • "First Union Will Unveil Community Plan Amid Backlash," The Wall Street Journal (no date)
  • "NationsBank Creates Scholarship Fund for Disabled Students," The Charlotte Observer (no date)
  • First Union Corp (no date), "Community Reinvestment Plan" press release
  • AT&T Universal Card Services (no date), "Microwaving Checks to Dry Wet Paper" press release