Capital Goods - October 2009
So much for government not negotiating with terrorists. A decade ago, Bruce Marks billed himself a “bank terrorist,” and he hasn’t backed away from the label. “We have to terrorize these bankers,” he recently told The Wall Street Journal. So negotiations between the N.C. Department of Commerce and his Boston-based nonprofit might seem odd — until you realize that lots of jobs were at stake.
In June, his Neighborhood Assistance Corporation of America agreed to invest $4 million and bring about 1,000 jobs to Charlotte — Tar Heel banking’s ground zero — in five years. The nonprofit, which makes affordable home loans to poor people, is hiring loan counselors, mortgage negotiators, call-center managers and customer-service representatives. Marks, Gov. Beverly Perdue and former Bank of America Corp. CEO Hugh McColl Jr. showed up for the announcement acting like best buddies.
To get the jobs, the state agreed to fork over financial incentives. Then things got even weirder. There was confusion over just how much taxpayer-backed help was on the way. The announcement from Commerce mentioned only a $1 million grant from the One North Carolina Fund, controlled by the governor, though it did say the money had to be matched locally. Turns out, the “local match” was government sleight of hand — on-the-job training money distributed by the Charlotte-Mecklenburg Workforce Development Board but provided by the federal government and funneled through the state. But Commerce Secretary Keith Crisco told Marks that NACA would get $3.5 million — the $1 million grant plus $2.5 million for on-the-job training. Just one problem: There’s a $1 million cap on training assistance. Crisco told The Charlotte Observer he had simply extrapolated the funds for job training, using a formula based on 100 jobs, which was multiplied by 10.
The two sides resolved things with Crisco announcing that the state would come up with the additional $1.5 million and Marks upping the job ante to 2,000. Details, such as where the money is coming from, have yet to be revealed. Obviously there’s not a whole lot of change under state government’s sofa cushions these days. The episode didn’t reflect very well on Crisco, an Asheboro elastics manufacturer and Harvard MBA. It suggests that maybe real-world business experience doesn’t transfer so easily to the fuzzy, secretive world of cutting economic-development deals. The revelations will surely cause more skepticism about claims that these incentives are based on hard, fast numbers.
Some also might wonder why state officials helped an organization seen by many as anti-banking — even one bringing 2,000 jobs to the state’s financial capital, still beleaguered by the credit markets’ near-meltdown and resulting recession. As one top banking official told me, banks and NACA have “a complex relationship.” It goes back more than a decade. McColl, CEO of what was then NationsBank, struck a deal rather than incur Marks’ wrath while seeking regulatory approval during a buying spree. In 1995, Bank of America’s predecessor made $500 million in loans available for NACA’s home-lending program.
It was a different story down the street, where NACA targeted First Union Corp. CEO Ed Crutchfield for what Marks viewed as the bank’s failure to provide affordable mortgages for low-income residents. It sent postcards to Crutchfield and his neighbors, criticizing the CEO’s professional and personal behavior. In a NACA-sponsored protest, not much is out of bounds.
Today, NACA has agreements with BofA, Wells Fargo & Co., JPMorgan Chase & Co. and Citigroup Inc. Besides originating loans, NACA restructures troubled mortgages. Even bankers who privately curse Marks acknowledge that NACA performs solid preloan counseling they cannot and finds qualified, low-income borrowers they miss. A foreclosure rate below the industry average backs up those comments.
But anyone who thinks Marks has mellowed or that NACA has matured into a staid quasi-bank should take a look at its Web site. It’s decorated with the mugs of banking execs such as Barclay’s Robert Diamond and Credit Suisse’s Robert Shafir, “Financial Predator” stamped over them. Photos of their homes, with the tax value of each, are shown. In February, NACA sent activists to picket the homes of those deemed predators.
All that concern for social justice raises a question: Shouldn’t a nonprofit, one that won’t be paying taxes but whose stated mission is helping the downtrodden, be worried about seeking those incentives? After all, Marks’ picture could show up on some Web site run by a do-gooder opposed to taxpayer giveaways. “Corporate-welfare king” just doesn’t jibe with “bank terrorist.”
Scott Mooneyham is the editor of The Insider, www.ncinsider.com.