Senate Panel Votes to Allow Banks to Merge Subsidiaries Into Coast-to-Coast Networks

The Senate Banking Committee voted unanimously Wednesday to let banks operate as one seamless network from coast to coast.

The bill, which requires full Senate approval and House action, would revise banking regulations in effect since 1927 and update the system for the modern era.

It would allow bank holding companies, which are growing rapidly in size as they buy up regional banks, to merge their subsidiaries into one main bank that could operate branches in any state.

Consumers could then cash checks, deposit money or get loans almost anywhere in the United States where their hometown bank had branches. The revision would simplify banking for the customer and lower costs for the industry.

Bank companies currently must have separate corporate structures for each state in which they operate.

“This is a major step toward modernizing our banking system and increasing its efficiency,” Senate Banking Chairman Donald Riegle (D-Mich.) said after the 19-0 vote.

“This is something we should have done 20 years ago,” Texas Republican Phil Gramm said.

“We are very optimistic,” said Edward Yingling, chief lobbyist for the American Bankers Assn. “A large number of lawmakers want to get this bill done without extraneous material to confuse it and blow it up.”

The measure has unusual momentum after passing the Senate Banking subcommittee; a similar bill zipped through a House Banking subcommittee earlier this month on a 25-0 vote.

Decades of wrangling among insurance agents, small banks and consumer activists over limiting bank powers had torpedoed a similar bill only two years ago. But lawmakers began to see nationwide banking as inevitable.

Many states have already banded together in regional pacts that allow banks to cross state lines. Automated teller machines, the ease of computer processing and competition from nationwide brokerage houses offering bank-style money accounts wore away resistance to the idea of mega-banks.

The final stumbling block was swept aside when Sen. Christopher J. Dodd (D-Conn.) said he would not insist on an amendment curbing banks’ ability to sell insurance.

The Senate panel’s bill would allow bank acquisitions across state lines one year after enactment. Subsidiary banks could be combined into one bank with interstate branches after two years. But individual states could choose to block out-of-state banks from operating branches if they wished.

Bank holding companies would not be allowed to control more than 25% of a state’s deposits without a waiver from that state or 10% of deposits nationwide.

bank holding companies