Fed Governor Criticizes 'Rush' to Regional Banking
Smith, Franklin L., American Banker
NEW YORK -- A Federal Reserve Board governor Thursday criticized "the rush to pass regional interstate banking laws.
"These laws are clearly designed to permit mergers among the largest banks within each region," Emmett Rice said. "Thus far, the bulk of the interstate activity has consisted of the acquisitions of relatively large firms by even larger firms. Because the merging banks did not compete in the same geographic markets, the antitrust laws did not prevent their merger."
Urging Congress to act on the matter, Mr. Rice said, "Change should not be a product of legal loopholes but should result from carefully formulated policies consistent with the long-term public interest."
He was speaking to members of the National Association of Urban Bankers at the opening session of the group's 10th annual convention.
Mr. Rice said nonbank providers of financial services, such as Sears, Roebuck and Co., are one source of pressure to interstate banking barriers. These firms are not bound by interstate banking prohibitions or by most of the other laws and regulations governing banks. In addition, many large thrift institutions and a few bank holding companies have expanded interstate by acquiring failing thrifts under the emergency clause of the Garn-St Germain Act.
"Many small rural banks fear competition from Sears more keenly than the threat of entry by large commercial banks," Mr. …