Merging banks vow aid to poor Chemical and Chase counter critics with $18.1 billion pledge


NEW YORK -- Chemical Banking Corp. and Chase Manhattan Corp. yesterday promised $18.1 billion in loans and grants to poor communities in an attempt to head off claims of lending discrimination that could delay their proposed merger.

The banks called the five-year, nationwide plan the largest of its kind, drawn from meetings with 366 community groups and government officials since the $10.3 billion merger was announced Aug. 28.

It shows that the merged Chase Manhattan, which will be the nation's biggest bank, is committed to lending to the poor, bank executives said.

Chase will exceed "what community groups advised us we should be doing," said Chemical Chief Executive Walter Shipley, who will hold the same job after the merger.

In small-business lending and other areas, Chase plans more loans and grants than Chase and Chemical would have provided if they had not agreed to merge. Three-quarters of the loans, or $13.5 billion, will be low-cost mortgages, roughly what the two banks would have made on their own, said Carol Parry, who will head community development at Chase.

Community groups have protested bank mergers, such as Fleet Financial Group Inc.'s pending $3.7 billion plan to buy Shawmut National Corp., by claiming that the banks gave poor service or didn't make many loans in low-income neighborhoods.

Under the 1977 Community Reinvestment Act, or CRA, regulators can delay or halt mergers if banks don't have a good record of lending in the communities where they do business.

Community groups long have said Chase focuses too much on middle- and high-income consumers, but does a good job donating to community groups. Chemical, by contrast, is considered one of the nation's best lenders to poor borrowers.

One New York community activist praised the plan.

"It's a marriage of strengths," said Mariadele Priest, executive director of Neighbors Helping Neighbors, a Brooklyn, N.Y., group that helps poor people buy homes.

Chase's plan comes before any major protests. In the past, many banks settled protests by making commitments to lend or to invest in poor areas. Chase wanted to take the initiative to head off problems, Ms. Parry said.

Though some groups may still lodge protests, the plan will "reassure a wide range of community groups and government officials that we are very committed to this," she said.

Chase said it will make $3.4 billion in loans and investments to not-for-profit community groups and small businesses, and will lend or invest $1.2 billion in affordable housing developments and donate $70 million to nonprofit groups.

Chase also plans to open two branches in poor New York neighborhoods, including one in the South Bronx, where there are no offices. And, the new Chase will invest $375 million in low-income housing tax credits, triple the two banks' plans before the merger, officials said.

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