Baker Supports Interstate Bank System by 1990

Treasury Secretary James A. Baker III today endorsed a shift to nationwide interstate banking in mid-1990, but without the tight restraints on bank mergers approved by a House committee.

Members of the Senate Banking Committee told Baker that they will continue to fight any move that goes beyond the Supreme Court’s decision Monday that allows states to join regional banking compacts that exclude other states.

“I certainly see no need to have an interstate banking title in our bill at all,” said Sen. Jake Garn (R-Utah), chairman of the Senate panel.

Regional Phase-out

But Baker supported legislation approved Wednesday by the House Banking Committee that would phase out regional compacts after five years. Under that bill, states that currently exclude banks from any other state are the only ones that could avoid making all others eligible to cross their borders after regional compacts are ended.

Baker said the shift to interstate banking on July 1, 1990, would allow what “seems to me to be a reasonable time period for regional banks to make the transition to full interstate banking.”

He termed unnecessary, however, a provision in the House bill that bans mergers among the 25 largest banks and blocks the three largest from acquiring any other large banks.

“The Administration is not convinced that size is inherently bad or that current antitrust laws are inadequate to deal with concerns about undue concentration of resources,” Baker said.

Bill for Big Banks

The House panel’s bill was a victory for big banks in New York and California, the losers in the Supreme Court ruling that sanctioned a pact between Massachusetts and Connecticut that prevents New York’s big banks from moving in. Similar multistate compacts have been formed in the Southeast and the Northwest.

“It looks as if the odds are stacking against those of us who believe in retaining the system that has served so brilliantly for so many years,” said Sen. William Proxmire (D-Wis.).

Proxmire said the United States is alone in the diversity of its banking system. There are 14,000 U.S. banks, with no group dominating the market, in contrast with other countries where a handful of national banks control 95% of the industry, he said.