Magazine article American Banker

Connecticut Joins Fed in Merger Suit

Magazine article American Banker

Connecticut Joins Fed in Merger Suit

Article excerpt

NEW YORK -- Connecticut will take the Federal Reserve Board's side in a suit by a Connecticut bank challenging a recent Fed interstate banking decision.

John G. Haines, Connecticut's assistant attorney general, said the state soon will apply to intervene and thus become a third-party defendant in the suit by Northeast Bancorp Inc. of New Haven against the Fed.

Northeast has filed suit in the United States Court of Appeals for the Second Circuit in New York to challenge a Fed decision on March 26 allowing the Bank of New England Corp. of Boston and CBT Corp. of Hartford, Conn., to merge.

Mr. haines made the statement Monday before the same appeals court, which was hearing oral arguments on another appeal by Northeast. This appeal concerned a lower-court ruling that Northeast lacked legal standing to challenge a New England interstate banking zone.

Mr. Haines urged the court to dismiss the earlier appeal because the issue will be addressed in the second appeal.

"We are parties to the Bank of New England-CBT case," said Brian J. Woolf, Connecticut banking commissioner, in a telephone interview. "It is Connecticut's law that is being challenged."

Northeast last August signed an agreement to be acquired by the Bank of New York Co. if federal or state interstate banking laws are changed to allow the merger to be completed. Wants Action in Florida

Meanwhile, Northeast's planned merger partner, the Bank of New York, disclosed that it will apply to federal bankng regulators to convert its Florida trust subsidiary into a consumer bank that will make consumer loans and accept consumer deposits.

Because the proposed institution will not make commercial loans, it would not be a bank for the purposes of the Bank Holding Company Act, which defines banks as institutions that accept demand deposits and make commercial loans.

Thus, restrictions on interstate banking activities contained in the Douglas Amendment and the McFadden Act would not apply to the proposed bank. …

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