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Making a difference.

Meeting CRA requirements can go beyond just making moreloansto oftenoverlooked markets. Financial institutions can help nurture these communities by contracting out more legal work and other business to women and minority law firms.

Regulations implementing the Community Reinvestment Act (CRA) provide guidelines designed, in part, "to encourage national banks to help meet the credit needs of their local community or communities." Under the rules, banks are required to post a public statement in their lobbies indicating the impact of the CRA and the fact that the bank is required by the Comptroller of the Currency to file a statement on how it intends to serve the "credit needs of each community" where it has a presence.

Private affirmative procurement programs

These regulations served as a kind of natural springboard from which one national bank - Nationsbank-developed a variation on typical CRA compliance. The innovation comes in the form of an "affirmative procurement" program, and the innovators have found that it makes good business sense on top of the fact that it assists in meeting CRA goals. The program is NationsBank's minority and small-business development program, an outreach program to bridge the gap between the bank and minority- and women-owned businesses that the bank may not have traditionally used in the past.

The philosophy is simple. If the banking industry is being encouraged to help meet the credit needs of the small/minority businesses within their communities, it also benefits banks to support those businesses by directly contracting with them, when appropriate, to provide goods or services. This includes "professional services" of law firms for the wide variety of legal work required by banks in the natural course of doing business.

According to Andrea Noriega, the Florida coordinator of minority and small business development at NationsBank, contracting minority- and women-owned firms makes good business sense because of "competitive pricing, better quality work and better service." This is a function of the fact that minority- and women-owned businesses will often bid more competitively against established law firms and will work extra hard to provide the kind of high-quality work and service necessary to satisfy the bank's needs and keep its business.

Hugh L. McColl Jr., president and chief executive of NationsBank Corporation, said, "We at NationsBank are truly committed to serving all of our banking communities, and I cannot emphasize enough how important I consider this outreach program."

While the Community Reinvestment Act speaks of the credit needs of each community, many have interpreted the act to include a true commitment to each community in every sense of the word. The use of local law firms, including minority- and women-owned law firms, is clearly a manifestation of that commitment.

There is considerable pressure being brought to bear on the banking community by civic leaders and regulators to develop such affirmative hiring programs as the one at NationsBank. Yet, amazingly little is being done by most major banks to support the very communities to which they are being encouraged to lend. It is undeniable that there is legal business to be had for minority- and women-owned firms in both the banking institutions that have formalized minority and small-business development programs and those without such programs.

But how do these law firms go about getting this business? The simple answer is to start by contacting the persons in charge of making the institution's minority and small-business contracting and procurement decisions, if the bank has a minority business development program.

At NationsBank, these decisions are orchestrated nationally by National Program Director Elena Bobadilla and regionally by coordinators within NationsBank's franchise. This franchise currently consists of nine states and the District of Columbia. The types of legal services consistently sought nationwide include general litigation, foreclosures, transactional, loan documentation and collections.

"Since we announced the merger [with C&S/Sovran Bank and NCNB Corp.], we at NationsBank have been faced with literally thousands of critical decisions. But it is no accident that one of the first decisions we made was the continuation of our level of commitment to minority and small business development," said Bobadilla.

"Today, we are suddenly a company with truly national influence in almost every area of financial services, but we will always be interested in doing business with our local suppliers. We have a responsibility to set a standard in serving our customers and supporting our communities. And we plan to meet that responsibility."

How to approach the institutions

Lawyers should not to be discouraged by the size of the financial institution they seek to do business with or by their own firm's size. If the institution does not have a special program, minority and women-owned law firms should con tact the institution's legal department and find out whether or not they have ever thought of launching this type of hiring program.

Although it may take some time and patience, once the minority law firm establishes the proper contacts within the bank, it can present the necessary credentials to handle the available legal work and proceed from there, as with any new legal client. A lawyer can make the banking institution aware of his or her firm's qualifications through a formal brochure, a descriptive letter and/or a personal meeting, guided by whatever professional ethics may apply to such efforts.

For the very small law firm with little experience in the large banking institution environment, it will mean starting with comparatively small engagements and receiving more sophisticated work as the relationship matures.

Networking with the institution

Noriega, and her regional NationsBank counterparts

throughout the country, go the extra mile to help small firms pursue business with the bank by conducting business forums to exchange information and network with the minority- and women-owned companies. They also consult with them on how to meet their own internal marketing and financial planning needs to better equip them to both get and handle the business once they receive it.

The bank also counsels minority- and women-owned businesses to become members of their local state chapter of the National Minority Supplier Development Council; be listed in their local chamber of commerce's minority and small-business listings, as well as participate in trade fairs regularly conducted for minority and small businesses.

Relationships within legal community

beneficial for banks

In the last few years, some institutions have spread their work among a number of law firms rather than concentrating it in the hands of one firm. This also makes good business sense because the bank can "spread the wealth" in the community. Often, lawyers manage large sums of money for clients who are involved in probate matters, real estate investments and so on, and these clients often rely on a lawyer's advice about the banks in which to deposit their savings and investment capital. This type of decision has taken on increased importance due to the number of bank failures nationally; especially with law firms that handle foreign nationals, who often will give their attorneys very broad discretion in choosing banking institutions for their certificates of deposit and general savings accounts.

Private bank programs in other market areas

Two other major banking institutions with established outreach programs are Chemical Bank in New York City and Signet Banking Corp. in Richmond, Virginia.

"Chemical Bank's minority vendor program will expand in the first quarter of 1993 to a comprehensive bankwide program that will enable minority- and women-owned business enterprises to work in partnership with Chemical Bank," said Denise Nix-Thompson, vice president and program director.

"The services provided to these businesses will include a meaningful percentage of contracts for goods and services purchased by the bank, technical assistance and, if appropriate, financial services, including business loans. The primary areas of focus on 1993 will be the construction, legal and marketing industries and general office products. Chemical is committed to helping small businesses grow and assisting New York City in its effort to promote the development of minority- and women-owned businesses, thereby fostering economic development."

Signet Banking Corp. also strives to include as many qualified minority- and women-owned businesses as possible in the procurement of goods and services. "To be a responsible member of the community we serve, Signet believes it is critical that the bank work to build a stronger, more equitable society," said James W. Proctor, the officer in charge of purchasing for all Signet offices throughout Virginia, Maryland and Washington, D.C.

"One of the most effective ways to achieve that goal is to support and promote minority- and women-owned business development," said Proctor. Through national and state development councils, Signet is also involved in counseling, education, seminars, trade fairs, training, lending and procurement for minority business entrepreneurs.

ABA minority counsel demonstration program

In 1988, the American Bar Association implemented its minority counsel demonstration program, designed to earmark work for minority law firms and individual minority lawyers. The program encourages corporations and governmental entities to retain minority law firms to do more of their legal work. It also encourages large established law firms to hire minority lawyers and assign minority lawyers to significant projects and promotes increased joint ventures between majority and minority law firms.

Federally mandated hiring programs

Under Section 1216 of the Financial Institutions Reform, Recovery and Enforcement Act (FIRREA) of 1989, various federal bank regulatory agencies must comply with Equal Employment Opportunity Act requirements to hire "to the maximum extent possible" minority- and women-owned businesses, including law firms.

While a law firm's prior certification as a minority contractor with federal or state agencies will also enhance its chances of receiving work from the private sector, private companies wishing to do business with the government must also have an established practice of hiring minorities and women.

Outreach programs

Active outreach for minority- and women-owned law firm legal business is regularly conducted by such government bodies as the Resolution Trust Corporation and the Federal Deposit Insurance Corporation (FDIC) legal divisions, which encourage co-counsel arrangements between the traditional law firms already well established in the banking communities and those that are not. This arises out of an attempt to more equitably distribute their legal business. The RTC and FDIC legal divisions, in fact, work directly with lawyers wishing to enter into these co-counsel arrangements by conducting local and national symposiums, offering assistance on critical issues, such as coordinating working teams, sharing billing information, client communication and maintaining extensive legal research banks available to approved counsel. To approach these entities for an application to act as outside counsel, a minority- or women-owned law firm should contact the outside counsel sections at the RTC or FDIC offices in Washington, D.C.

The RTC program

According to Mary Terrel, senior counsel at the RTC's division of legal services, the RTC has a very broad and expansive outreach program that encourages both direct referrals to these minority-owned firms and joint counsel referrals to increase the quality and quantity of matters referred to these firms by its legal division.

Since the formation of the outside counsel management and minority and women outreach section in December 1991, the RTC division of legal services has issued three major policy statements. Policy statement 92-01 outlines the minority and women outreach program; 92-02 outlines the joint referral program; and 92-04 outlines the minority and women partners program.

This comprehensive approach to outreach has enabled th RTC to communicate through its quarterly newsletter Reaching Out to meet the mandate of FIRREA to ensure opportunities for minority- and women-owned law firms and for minorities and women in RTC contracting activities to the maximum extent possible.

Future outreach initiatives will include the publication of national directory of women-owned and minority-owned law firms that will facilitate more joint counsel arrangements among these firms and between them and nonminority firms Each of the six RTC supersites across the country will host mini-symposium modeled after the successful national symposium that was co-sponsored by the RTC, the Federal Deposit Insurance Corporation and the national minority an women bar associations in Dallas in January 1992. "The joint counsel program has emerged as the premier RTC outreach program. Under this program we have witnessed a significant increase of complex matters usually reserved for larger firms now being jointly referred to firm with [minority- and women-owned law firms] as joint counsel partners," said Terrell.

The FDIC program

According to Ashley Doherty, assistant general counsel at the FDIC in Washington, D.C., not only is the FDIC committed to affirmatively seeking to engage minority- and women-owned firms as outside counsel, they emphasize the engagement of such firms; co-counsel arrangements between these firms and majority firms; and assignment of FDIC matters to minorities and women within majority firms retained by the corporation.

The legal division of the FDIC engages outside counsel primarily to provide legal services in connection with liquidation, conservatorship and receivership activities. A variety of matters may arise from any failed financial institution for which the FDIC is responsible. Some of these matters include professional liability litigation, collections, commercial litigation, environmental law and foreclosures.

In three speeches in the last year, Alfred J.T. Byrne, FDIC general counsel, has reiterated the corporation's commitment to minority and women professional outreach efforts an reaffirmed the FDIC's commitment to "encourage and support the retention of minority contractors." During the last year, the FDIC has doubled the number o referrals to minority and women law firms. Approximately 8 percent of all referrals - amounting to $8.5 million - now go to such firms. One office of the legal division referred as much as 18 percent of its work to minority- and women-owned firms in the month of July 1992. "These figures demonstrate the FDIC's ongoing commitment to [minority and women law firm] participation in FDIC matters," said Doherty.

Congressman Gonzalez' push for more


Although the government has long been the leader in this area, currently there is a particularly aggressive push in Congress by House Banking Committee Chairman Henry Gonzalez (D-TX) for the government to make an even more concerted effort to enforce the employment regulations for minorities and women-owned firms.

As chairman of the Committee on Banking, Finance and Urban Affairs, Gonzalez's June 1992 report to the committee covering federal banking agencies is highly critical and concludes that minorities and women continue to receive less than their fair share of the contracts awarded. Clearly, the trend in Congress and the agencies responsible for enforcement is to require that government agencies and the private sector engage in more aggressive outreach activities.

Shift in the power base

Whether it is happening on a voluntary or mandated basis, there is no denying that a major shift in the makeup of the power base in the legal and business communities is currently taking place. That shift is away from the old-boy network of a few large, traditional law firms cornering the legal market in such areas as the private banking world - where "redlining" was once the norm - toward a more equitable distribution, largely through outreach programs, of significant amounts of business. More outreach should be the norm, not only for major national banks, but also for smaller banks and S&Ls across the country.

Minority- and women-owned law firms must position themselves to be able to handle the business that, inevitably, will become available. With the massive involvement of the RTC and FDIC in the area of real estate foreclosures and numerous bank failures, minority- and women-owned businesses should move fast to participate in those fields where their inclusion is federally mandated.

Without doubt, professional minority outreach programs, such as those established by the FDIC and the RTC will be the wave of the future for the private banking arena. This will occur not only because it makes good business sense, but also because of the shift in the power base that is illustrated so graphically by the results of the 1990 census. Census figures show that minorities have significant and growing political and economic clout.

Moreover, the recent court decisions on redistricting pursuant to the Voting Rights Act will continue the trend toward the equalization of opportunity and influence by minorities in America's changing business environment. And finally, as outreach programs create more opportunities, there also will be more business for minority- and women-owned law firms and other businesses in both the private and public sectors in the future.
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No portion of this article can be reproduced without the express written permission from the copyright holder.
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Title Annotation:Community Reinvestment Act of 1977
Author:Perez, Alfonso J.
Publication:Mortgage Banking
Date:Dec 1, 1992
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