NEW YORK -- Two community activist groups filed a Christmas Eve lawsuit to overturn the Federal Reserve's approval of NationsBank Corp.'s $9 billion agreement to buy Boatmen's Bancshares.
In a lawsuit filed in the 10th Circuit Court of Appeals in Denver, the two groups -- Inner City Press/Community on the Move and the New Mexico Alliance -- contend that the Federal Reserve in its Dec. 16 approval of the banks' announced merger ignored a NationsBank finance subsidiary's alleged history of discrimination.
The groups are seeking an emergency stay and cancellation of the Fed decision. "NationsBank's high interest rate finance company, NationsCredit, disproportionately targets people of color, and gouges the poor," said Matthew Lee, executive director of Inner City, which is based in the Bronx, N.Y.
"The Federal Reserve refused to examine NationsCredit, and ignored the more than 100 consumer and civil rights lawsuits filed against the company since 1993," Lee added.
NationsBank says it expects to close the merger by Jan. 7, and any delays would cost it at least $36 million a month.
The Federal Reserve did not rule on the finance company's lending record, but instead focused on NationsBank's Community Reinvestment Act rating, which grades the commercial bank.
While similar lawsuits have failed in the past, Inner City's focus on the finance subsidiary may have magnified an inconsistency in how the Fed approves mergers.
NationsBank has stressed its CRA rating, which has been the principal way that banks' lending practices have been judged. But the industry's move into other lines of businesses, such as finance, is still not a major factor in federal merger reviews.
XTC Ironically, banks have long argued that when the Justice Department calculates deposit and loan concentration when reviewing the antitrust effects of a proposed merger, nonbank financial services companies should be included in the review.
Inner City, which is renowned for bringing these cases, has been making the finance company argument since October.
But the lawsuit includes a new complaint: that the $1.50 automated teller machine fee NationsBank charges noncustomers is anti-competitive, because of the dominance NationsBank will have in many states, ICP said.
This has become a hot button issue of late, with many in Congress railing against bank ATM surcharges.
Pub Date: 12/27/96