December 9, 2004

Community activists, Sovereign sign $3.6b investment plan

Jeremy Schwab

Sovereign Bank New England executives signed an agreement last week with activists of color promising to direct $3.6 billion in benefits, mainly home and small business loans, to low- and moderate-income people in Massachusetts between now and 2008.

Bank executives negotiated the deal over the past year with the Community Advisory Committee formed by state Sen. Dianne Wilkerson in 1998 to negotiate such deals with major banks.

“It is a refreshing change in what historically has been a tension-filled environment when community groups go to banks to talk about commitment,” said Wilkerson before the signing ceremony at Sovereign Bank’s main Boston office. “In this climate of shrinking corporate presence and rapid consolidation and mergers of financial institutions, Sovereign Bank stands tall, committed to serving its most needy and often underserved customer base.”

The deal extended the bank’s 2000 commitments to lend to small businesses and low- and moderate-income homebuyers, purchase goods and services from minority-owned businesses and contribute money to business development and job training in lower-income neighborhoods.

Activists who negotiated the deal say it will help continue to build trust between the bank and people of color who are often wary of banks due to historical discrimination.

Before the civil rights movement, banks often would not give loans to African American-owned businesses. Would-be homebuyers, meanwhile, were denied bank loans.

Today, observers say the discrimination continues. They point to predatory lenders, who market loans with high and hidden fees disproportionately in neighborhoods of color.

“There’s no question that these kinds of agreements are almost essential, because we have experienced, unfortunately, handshakes in the past from banks and other corporations and they are only handshakes,” said NAACP Boston Branch President Lenny Alkins. “The deliverance of what they say they will do has fallen short.”

Sovereign Bank was on track to meet its monetary promises under the 2000 agreement negotiated between the bank and the Community Advisory Committee and due to expire next year, say committee members and Sovereign officials.

“We met or exceeded every one of our commitments in that agreement,” said Sovereign Bank Executive Vice President Ronald Walker. “We are committed to economically develop these communities and being a part of them.”

A Sovereign Bank representative could not say, however, how much of the bank’s loan value went to communities of color in Boston.

The new agreement calls for Sovereign Bank to invest $1.2 billion in small business loans and $940 million in mortgage lending to low- and moderate-income people in Massachusetts. It also calls for the bank to contribute $222 million in community development financing for affordable housing projects and commercial real estate sponsored by for profit and nonprofit organizations.

Bank executives promised to invest $30 million in equity in community development corporations, community development financial institutions, equity loan pools and other entities serving small businesses.

Bank executives agreed to provide $25 million in loans via the federally funded empowerment zones in Boston, Worcester and Springfield. The money will pay for job training and business development for residents of the low-income neighborhoods in the zones — a major boost for the often cash-strapped organizations that run the empowerment zone programs.

“It’s about time,” said George Greenidge, board president at Boston Connects, Inc., which runs Boston’s Empowerment Zone. “For years, we’ve been talking about how to get greater leverage with corporations.”

The agreement also calls for Sovereign Bank to funnel 20 percent of its expenditures on contracts for goods and services in Massachusetts to businesses owned by people of color, and 15 percent to businesses owned by women. The deal calls for bank executives to strive for 20 percent of their employees to be people of color.

It has become increasingly difficult for activists to bring banks to the table to negotiate community benefits as larger banks acquire Boston- or New England-based institutions, making the Community Advisory Committee’s success and Sovereign Bank’s willingness to negotiate more remarkable.

San Francisco-based Bank of America merged recently with Fleet Bank, the institution which had previously acquired Bank Boston. But Bank of America made fewer specific commitments to Massachusetts community development initiatives than had Fleet, promising instead to step up its national giving.

“When you talk about community reinvestment, that is dangerous because they feel the lion’s share of the investment should go where their headquarters is, not their subsidiaries,” said Alkins.

The Community Advisory Committee, which has negotiated community development agreements with other major banks including Citizens Group, Bank of America and Fleet Bank, has proved critical in pressuring banks to invest in working class communities in the state.

So has the Community Reinvestment Act, a state law that requires banks to invest in lower-income communities.

Wilkerson is joined on the committee by representatives of Sovereign Bank, the New England Area Conference of the NAACP, the Boston Branch of the NAACP, Fair Housing Center of Greater Boston, Massachusetts Association of Community Development Corporations, Citizens’ Housing and Planning Association, Urban League of Eastern Massachusetts, Veterans’ Benefits Clearinghouse and the offices of Boston City Councilor Chuck Turner and U.S. Sen. John Kerry.

Committee members plan to reach out to under-served communities to encourage community members to take advantage of the loans and other investment opportunities promised under the agreement.

 “We will make sure community agencies are aware of this agreement,” said Alkins.

The bank’s development officers in local branches, meanwhile, will reach out to businesses to inform them of the opportunities.

Sovereign operates branches in Mattapan Square, Fields Corner, Upham’s Corner, Columbia, the Washington Park Mall, Egleston Square and other locations throughout Boston and Massachusetts.


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