Redlining from Afar: How Consolidation Killed Off St. Louis’s Exemplary Minority Lender

Just after Thanksgiving in 1996, a group of 146 St. Louisans, mainly from the black business community, boarded a chartered TWA jetliner and flew to New York City. Their goal? To block the takeover of their hometown Boatmen’s Bank by shutting down the New York Stock Exchange.

Led by the St. Louis lawyer Eric Vickers, the group included members of the St. Louis Minority Contractors Association, the National Black Chamber of Commerce, and the Minority Business Enterprise Legal Defense and Education Fund of Washington. Their ultimate target was Charlotte-based NationsBank, which had recently announced plans to spend $9.5 billion to buy the 150-year-old Boatmen’s, which many considered a cornerstone of the St. Louis business community.

According to company lore, the founder, George Knight Budd, started the institution in 1847 to assist the working-class longshoremen and boatmen who loaded and crewed the riverboats that plied the Mississippi. This tradition of focusing on working-class citizens and small businesses continued right into the 1990s, when Federal Bank officials and black community groups praised Boatmen’s for having one of the nation’s most responsive minority loan-lending programs—a bright spot in a city with a long, painful history of commercial redlining.

Bank regulators gave Boatmen’s an “outstanding” rating three consecutive times from 1992 to 1995 for its adherence to the Community Reinvestment Act (CRA) of 1977, which required lending institutions to meet the needs of borrowers in all communities. By 1993, Boatmen’s was providing $284 million per year under the CRA program.

The St. Louis Small Business Administration ranked Boatmen’s as the top SBA lender in both the number of approved loans and dollar volume, a first for any bank in the Midwest. Its Boatmen’s Specialized Small Business Lender Program was specifically designed to increase the amount of money given to women- and minority-owned enterprises.

Vickers and a coalition of minority advocacy groups believed that NationsBank would dismantle Boatmen’s community lending programs. Their outrage was fueled by a lawsuit filed by John Relman, a fair-housing director at the Washington Lawyers’ Committee for Civil Rights and Urban Affairs. He alleged that NationsBank loan officers engaged in discriminatory lending practices, on a national level. Minority customers in New York City, Memphis, New Mexico, and Texas, where Boatmen’s also had a notable presence, opposed the takeover too.

By the time Vickers and his group arrived in New York, police already had barricaded the streets around the New York Stock Exchange. Only employees who flashed their IDs could walk onto the trading floor. Harry Alford, president of the National Black Chamber of Commerce in Washington, protested, “The black community is getting shortchanged.”

Yet in the end, NationsBank barely had to sweeten the deal to get it past bank regulators at the Federal Reserve. The East Coast bank pledged $10 million in loans for affordable housing in St. Louis, and donated $4 million to Forest Park, the city’s preeminent, 1,300-acre green space.

Shortly thereafter, NationsBank cut 500 employees in its new St. Louis-area holdings, including fourteen senior managers. It also dismantled the local bank’s suite of minority-lending programs. Construction workers removed the old Boatmen’s signs, with their iconic paddlewheel riverboat logo, and replaced them with red-and-blue print that read, plainly, NationsBank.

Within a year, NationsBank itself was swallowed by Bank of America. This time, the protests of black business leaders, in both St. Louis and cities across the nation, reached the White House. In July of that year, President Clinton joined Cathy Bessant, head of Bank of America’s community development banking group, on a platform near a newly built Walgreens store in East St. Louis. She outlined the bank’s plan to spend $500 million to “catalyze” investment in the region, and in other underserved areas across the nation.

But a year later, the grants awarded from the fund didn’t include any projects in the St. Louis metro area. Meanwhile, Community Reinvestment Act ratings indicate that Vickers and his supporters had the right idea when they flew to Wall Street two decades ago. The most recent performance evaluation for Bank of America’s St. Louis lending activity notes that “the geographic distribution of home mortgage loans is poor,” and that only one of its sixty branches serves residents in low-income areas.

Click here to read main story The Real Reason Why Middle America Should be Angry.

Brian S. Feldman

Brian S. Feldman is a researcher-reporter with the Open Markets Program at New America and a graduate of Washington University in St. Louis.