Governor OKs Bill on Interstate Banking

Gov. George Deukmejian ended nearly 10 years of high-powered lobbying by New York’s banking giants Thursday by signing into law legislation that will fully open California to out-of-state banks by 1991.

The two-bill package, which was opposed by some consumer groups that fear a drain on California deposits, was nonetheless supported by California’s banks and savings and loan industry amid promises that the new competition will spur an array of consumer benefits.

The package was among dozens of bills signed by Deukmejian as he worked to clear his desk of reams of legislation sent to him before the Legislature’s regular 1986 session ended earlier this month.

Tuesday is the deadline for Deukmejian to act on hundreds of bills approved during final weeks of the session.

Other measures signed by the governor will:

- Provide relief to economically depressed rural counties. The governor’s so-called “rural renaissance,” contained in a bill by Senate Republican leader James W. Nielsen of Woodland, offers grants of up to $8 million to 41 rural counties hard hit by economic problems, particularly in agriculture and the timber industry. The bill authorizes an additional $29 million in loans, but only if lawmakers include the money in next year’s budget.

- Ban all forms of corporal punishment in California public schools. The bill, by Assemblyman Sam Farr (D-Carmel), supersedes existing law that allows teachers to spank students with written permission from parents. The new law, however, does not restrict corporal punishment in private schools.

- Eliminate student smoking areas on public high school campuses and at school activities. The measure, by Assemblyman William J. Filante (R-Greenbrae), reverses an eight-year-old state policy that sought to accommodate and control student smokers. Beginning Jan. 1, students found with tobacco products at school will be subject to suspension or expulsion.

- Create a commission to study self-esteem. The bill was Assemblyman John Vasconcellos’ (D-Santa Clara) third attempt to establish such a commission, which he believes could be instrumental in attacking some of society’s most vexing problems: teen-age pregnancy, drug abuse and poor achievement in schools. Similar measures were rejected by the Legislature in 1984 and vetoed by Deukmejian last year. The commission will have a $245,000 budget.

The interstate banking legislation, among the most heavily lobbied measures of the Legislature’s session, will open the state’s financial borders to outside competition in two phases.

Competitive Battle

Beginning next July, banks and savings and loans in a 12-state western region will be allowed to cross into each other’s territories. That will give California banks time to gird for a competitive battle beginning in 1991, when banks from New York and other eastern states will be allowed to acquire financial institutions in California.

Federal Depression-era laws prevented most banks from crossing state lines, with few exceptions. But the U.S. Supreme Court over the years punched several large holes in the law, allowing banks to set up limited operations elsewhere as long as they take deposits or make loans but not both.