Magazine article American Banker

Conover, Gray Clash on Interstate Banking

Magazine article American Banker

Conover, Gray Clash on Interstate Banking

Article excerpt

BOSTON -- Federal Home Loan Bank Board Chairman Edwin J. Gray said last week that passage of an interstate banking law now would endanger the fety and soundness of teh thrift industry.

However, Comptroller of the Currency C.T. conover disagreed sharply with Mr. Gray's remarks, stating that interstate banking is necessary to restore fair competition to the financial services marketplace.

They made their remarks at an interstate banking conference sponsored by the Boston University Law School's Morin Center for Banking Law Studies. Mr. Gray did not attend the convention personally, but a prepared statement was read at the meeting.

Mr. Conover said that the moratorium he imposed on approving charters for limited-service interstate banks was not intended to halt interstate banking.

A bill giving congressional blesing to regional reciprocal interstate banking is currently pending in Congress. Mr. Gray maintained that the thrift industry needs "breathing room" to recapitalize and restructure after the earnings and asset quality problems of recent years.

These problems, he pointed out, have put the Federal Savings and Loan Insurance Corp., the deposit-insurance arm of the Bank Board, under "enormous strain," The Bank Board chairman noted that since the proposed legislation would allow bank holding companies to acquire healthy thrifts, there would be no incentive for buying failing thrifts. And this would increase the pressures on the deposit insurance fund, Mr. Gray said.

The FSLIC would have to close failed thrifts and pay off depositors rather than arrange a merger with a healthier institution, Mr. Gray said. Citicorp, for example, has been allowed to acquire large ailing thrifts in Chicago, Miami, and San Francisco.

It is Bank Board policy generally to approve interstate thrift acquisitions only in emergency situations. …

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