Magazine article American Banker

ABA Leaders Drop Backing for Interstate Bill: Although Board Supports National Banking, Group Sees No Consensus among Membership

Magazine article American Banker

ABA Leaders Drop Backing for Interstate Bill: Although Board Supports National Banking, Group Sees No Consensus among Membership

Article excerpt

WASHINGTON -- In a major and surprising retreat, leadership of the American Bankers Association Thursday dropped its support for specific legislation that would phase in nationwide banking.

The ABA's leadership conference and board of directors stated that they support full interstate banking and the passage by individual states of interstate laws. Nonetheless, they decided that there currently is no consensus among the ABA's diverse membership regarding how and when to accomplish interstate banking at the federal level.

"The appropriate bodies within the ABA will continue to actively pursue a solution to this issue -- as more states enact interstate laws and as the market continues to move to full interstate banking," the trade group said.

The ABA said it will continue pushing on other congressional matters where there is more industry agreement -- expanded powers for banks and the closing of the "nonbank bank loophole" that has resulted in limited-purpose banks that could be operated interstate and by nonbanking firms.

The vote against nationwide banking is seen as victory for small banks, state governments, and others that oppose a federal mandate for nationwide banking.

It also casts further doubt on the passage of nationwide banking legislation. Such legislation is supported enthusiastically by large banks and, until Thursday, it also was supported by the ABA as a result of a February leadership vote. The major focus has been on HR 2707, a controversial bill approved by the House Banking Committee in June that would permit the first stage of a five-year phase-in of nationwide banking to begin in 1990.

According to Kenneth Guenther, executive director of the Independent Bankers Association of America, whose members are mostly small and rural banks, "It's a major policy shift which removes the most divisive issue plaguing the banking industry for a year. It should open the door for a more united banking approach to the Congress that should lead to favorable banking legislation next year."

But representatives of banks in favor of nationwide operations denounced the decision and warned of troubles. Some said many large banks will further turn away from the the ABA as a Washington representative and that members of Congress will downgrade the influence of the ABA.

Kenneth L. Roberts, chairman of the Association of Bank Holding Companies and chairman of the First American Corp. in Nashville, Tenn., expressed disappointment with the ABA action. …

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