Bush Interstate Bank Proposal Survives Test
A Bush Administration proposal to permit full interstate banking within three years narrowly survived a key test in the House Banking Committee on Tuesday.
The panel rejected on a 26-23 vote an amendment that would have allowed states to block branch offices from out-of-state banks. Then, on a 25-24 vote, it defeated an amendment by Rep. Jim Leach (R-Iowa) that would have offered interstate banking only to the strongest banks.
The first amendment, a combination of proposals offered by Reps. Charles E. Schumer (D-N.Y.), Stephen L. Neal (D-N.C.) and Doug Bereuter (R-Neb.), would have given state legislatures two years to pass laws forbidding out-of-state banks from establishing branches. If they did, their own banks would have been forbidden from expanding into other states.
On the second measure, Leach argued that the savings and loan crisis should serve as a warning against allowing undercapitalized institutions to expand.
Rejection of the amendment “is profoundly out of step with the whole experience of the 1980s,” he said.
The two votes were seen as the key tests of the Administration’s interstate banking plan, although the committee was still considering other less-drastic modifications.
Smaller banks and consumer groups have been fighting interstate banking, generally forbidden since 1927 though allowed through holding companies and with state approval since 1956.
These opponents fear full interstate banking would subject community banks to competition from and takeover by larger out-of-state rivals.
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