Maryland Vote Kills Interstate Banking Bill, but State Task Force Will Study Issue Further

American Banker, April 6, 1984 | Go to article overview

Maryland Vote Kills Interstate Banking Bill, but State Task Force Will Study Issue Further


BALTIMORE -- A special task force will study Maryland legislation seeking reciprocal interstate banking privileges -- but only after the General Assembly session ends later this month. The action follows a 15-to-8 vote by a state House of Delegates committee to kill for this session a controversial interstate banking bill backed by Citicorp.

Gov. Harry Hughes requested in a letter to the committee chairmn that the legislation be delayed while the governor sets up a nine-member task force to study the impact of increased banking competition in the state. The task force will be headed by Frank J. DeFrancis, Maryland's secretary of economic and community development.

Mr. DeFrancis promised the committee that the study would be completed by late summer and that the Hughes administration would develop recommendations in time for the next legislative session, which begins in January. If the task force determines it is vital for the state to move more rapidly toward interstate banking, he added, the governor will call for a special legislative session before the year is out.

Delegate Ellen R. Sauerbrey, a Republican from Baldwin, said she opposes waiting for the study. The trend toward interstate banking willcreate a new Each Coast banking center, Ms. Sauerbrey said, adding that it would be better for the state if such a center were in Maryland than in Delaware or Pennsylvania.

Mr. DeFrancis, however, argued that national reciprocal banking might not come about for 10 or 15 years. He said that if Maryland passed the legislation recently tabled by the House committee, it might be left out of regional compacts, in which several states jointly decide to welcome each other's banks. No Unfriendly Takeovers

The bill was sponsored by Delegate R. Terry Connelly, a Baltimore Democrat, and was actively opposed by Maryland-based banks. It would have allowed out-of-state banks to establish full-service branches in Maryland if Marland banks had the same freedom to establish similar outlets in their states.

to ease concerns that the bill's passage would result in Maryland banks being gobbled up by much larger New York institutions, the measure was amended to prohibit any unfriendly bank takeovers.

But Mr. DeFrancis insisted that it would be better first to study an emerging regional compact in the Southeast, as well as an existing zone in New England, to determine whether they caused any consolidations, how they affected the states in those compacs, and what impact they are likely to have on Maryland.

Within a fe days of the legislative action killing the bill, a new controversy arose between Maryland-based banks and Citicorp. Some observers believed the dispute was related to the reciprocal banking fight.

Citicorp, in an effort to show that Maryland banks are not very competitive, offered to pick up all guaranteed student loans in the state without taking the subsidy the state now pays local banks on the loans.

The offer followed statements by Maryland banks now active in the student loan program that they might reduce their participation because the governor, in an effort to balance Maryland's budget, wants to cut the state subsidy to $1 million next year from $2. …

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Maryland Vote Kills Interstate Banking Bill, but State Task Force Will Study Issue Further
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