Interstate Banking

State Bank Commissioner Margie H. Muller, in a rare admission from a government official, dismissed her own report on interstate banking as "little more than a yawn."But banking in Maryland and the nation is "on the threshold of a new era" called interstate branching, Ms. Muller argued yesterday, and that calls for the state to exercise extreme caution.Interstate branching, should Congress authorize it, would allow companies such as NationsBank Corp. to dispense with the complications of establishing separate banks in each of the states in which it operates, and merely establish far-flung branches of one bank.

In the past few years, millions of Northerners have learned to shop at Wal-Mart.In the end, First Union Corp.'s announcement Monday that it will acquire First Fidelity Bancorp. for $5.4 billion is a bet that Baltimore, New Jersey and Philadelphia will learn to love banking at Wal-Mart, too -- figuratively, that is.The merger is the latest wave of consolidation that is sweeping banking nationwide, and which analysts expect to put a hard squeeze in the next few years on midsized banks like those that have traditionally served Baltimore.

Now that national interstate banking appears imminent, bankers in Maryland are reacting exactly as the situation demands: They're simply conducting business as usual.The bill that passed the Senate Banking Committee Wednesday provides for a one-year waiting period before interstate banking would take place -- that's one year from an expected Memorial Day bill signing, assuming the legislation continues to move smoothly through Congress.The Senate bill also calls for a two-year delay before companies may merge their subsidiaries into one multistate branch network.

Mercantile Bankshares Corp. Chairman H. Furlong Baldwin promised shareholders yesterday that relaxed banking industry regulations won't alter the company's devotion to fiscal conservatism and community banking.Speaking at the Baltimore bank holding company's annual meeting, Mr. Baldwin said he and the company approve of moves to allow national interstate banking, which would complete moves long under way to dismantle laws that once limited banks to operating within a single state, and to reform the Depression-era Glass-Steagall Act, which restricts banks' involvement in the securities business.

House and Senate conferees last week ironed out the details of an extensive interstate banking bill. Absent an extended challenge over one issue specific to Texas, Congress is expected to pass a law that will allow banks in all states to acquire banks anywhere else, after a one-year delay; and will allow banks with operations in several states to treat all their subsidiaries as branches of one bank, rather than separate subsidiary banks. That would occur in 1997.The bill allows individual states to exempt themselves.

WASHINGTON -- As many as 24 Senators are joining a campaign to blunt the Bush administration's efforts to permit full-blown interstate branching by banks.Leading the coalition of senators from Midwest and rural states is Sen. Wendell Ford, D-Ky., who aims to help the states retain substantial control over out-of-state banks operating within their borders.A spokesman for Mr. Ford said the senator is working closely with the Kentucky Bankers Association on his plan."We have 12 or 13 states supporting our position now," said the spokesman.

NEWTON, Mass. -- Federal Reserve Chairman Alan Greenspan called yesterday for Congress to expand banks' business options by allowing them to sell insurance and stocks.Mr. Greenspan also suggested that some limits could be placed on bank deposit insurance and seemed to imply that these limits might be imposed as part of a compromise that would allow banks into securities and insurance activities.Depository insurance makes it possible for banks to hold larger and riskier asset portfolios than otherwise, distorting the economy and exposing taxpayers to possible significant losses, Mr. Greenspan said.

Mercantile Bankshares Corp. Chairman H. Furlong Baldwin promised shareholders yesterday that relaxed banking industry regulations won't alter the company's devotion to fiscal conservatism and community banking.Speaking at the Baltimore bank holding company's annual meeting, Mr. Baldwin said he and the company approve of moves to allow national interstate banking, which would complete moves long under way to dismantle laws that once limited banks to operating within a single state, and to reform the Depression-era Glass-Steagall Act, which restricts banks' involvement in the securities business.

WASHINGTON -- Congressional leaders on bank issues are supporting the Bush administration's proposal to remove the remaining barriers to interstate banking, a central goal of the banking industry.But there is resistance among some key lawmakers to parts of the plan that would expand the powers of banks by allowing them to deal in securities, insurance and mutual funds and parts that would allow industrial companies such as Ford Motor Co. or Exxon Inc. to buy banks.In the wake of the savings and loan fiasco, lawmakers are wary of letting banks, even through separate affiliates, get involved in risky ventures.

NationsBank Corp. is about to make an exit from Maryland, but the only thing leaving the state is its legal address.The company has applied to federal regulators for the right to move the headquarters of its Maryland subsidiary 30 miles south from Bethesda into Virginia, and merge that subsidiary into its Virginia bank, which is based in Richmond.The result will be a bank headquartered in Virginia that also has branches in Maryland and Washington. Regulators are expected OK the move.For NationsBank, the move should result in some cost savings, mainly from fewer reports that will have to be compiled for regulators.

Now that national interstate banking is imminent, state lawmakers were warned yesterday by bankers that Maryland had better jump into the fray now or risk putting the state's banks years behind the curve against out-of-state competitors.But some legislators questioned whether throwing open the state's doors to out-of-state banks will doom the small community lender."The financial implications of this bill may imply that down the road there may not be community banks," said Del. David Rudolph, a Democrat from Cecil County.

NationsBank Corp. is about to make an exit from Maryland, but the only thing leaving the state is its legal address.The company has applied to federal regulators for the right to move the headquarters of its Maryland subsidiary 30 miles south from Bethesda into Virginia, and merge that subsidiary into its Virginia bank, which is based in Richmond.The result will be a bank headquartered in Virginia that also has branches in Maryland and Washington. Regulators are expected OK the move.For NationsBank, the move should result in some cost savings, mainly from fewer reports that will have to be compiled for regulators.

NEWTON, Mass. -- Federal Reserve Chairman Alan Greenspan called yesterday for Congress to expand banks' business options by allowing them to sell insurance and stocks.Mr. Greenspan also suggested that some limits could be placed on bank deposit insurance and seemed to imply that these limits might be imposed as part of a compromise that would allow banks into securities and insurance activities.Depository insurance makes it possible for banks to hold larger and riskier asset portfolios than otherwise, distorting the economy and exposing taxpayers to possible significant losses, Mr. Greenspan said.

House and Senate conferees last week ironed out the details of an extensive interstate banking bill. Absent an extended challenge over one issue specific to Texas, Congress is expected to pass a law that will allow banks in all states to acquire banks anywhere else, after a one-year delay; and will allow banks with operations in several states to treat all their subsidiaries as branches of one bank, rather than separate subsidiary banks. That would occur in 1997.The bill allows individual states to exempt themselves.

Put them away and forget about them.That's how investors used to view bank stocks, a reliable core holding in conservative portfolios and trust funds back in "the good old days."Nothing lasts forever, however, and the banking industry was subsequently hit with:* Real estate and interest rate woes in the 1970s.* Disastrous loans to developing countries and a commercial real estate decline in the 1980s.* Slow economic revival, competition from nonbank financial-service companies such as mutual funds and brokers, and continuing controversy over use of derivative securities in the 1990s.

Baltimore Bancorp, parent of the Bank of Baltimore and one of the last big locally based banking companies, yesterday ended a wild three-year ride for its employees and shareholders by announcing it has agreed to be sold to the First Fidelity Bancorp. of Lawrenceville, N.J., for $346 million in cash.If approved by regulators and Baltimore Bancorp's shareholders, the deal, valued at $20.75 a share, would be First Fidelity's initial move into Maryland. The company, which has 650 branches in New Jersey, Pennsylvania, New York and Connecticut, is the nation's 24th-largest banking company, with $33.8 billion in assets.

Congress is poised to knock down the barriers to interstate banking, a step that would allow any bank to buy another bank anywhere in the country. If the bill survives attempts to load it up with killer amendments, a process that has doomed the initiative in the past, it would supersede Maryland statutes that limit takeovers and mergers to banks already located in the Southeast Compact region extending from here to Florida.As a result, the few Maryland-owned banks remaining would be vulnerable to acquisition bids from larger banks elsewhere in the country.

Now that national interstate banking appears imminent, bankers in Maryland are reacting exactly as the situation demands: They're simply conducting business as usual.The bill that passed the Senate Banking Committee Wednesday provides for a one-year waiting period before interstate banking would take place -- that's one year from an expected Memorial Day bill signing, assuming the legislation continues to move smoothly through Congress.The Senate bill also calls for a two-year delay before companies may merge their subsidiaries into one multistate branch network.