Big Banks Subjected to Congressional Heat


House Banking Committee members groused and grumbled on Wednesday about poor service at banks, high fees for using ATM machines and a scarcity of branches in minority neighborhoods, but they showed no appetite for any actions to block the financial mega-mergers announced in recent weeks.

Federal regulators testifying before the committee also adopted a hands-off attitude about the proposed mergers, saying the market for banking services will remain competitive. Earlier this month, San Francisco-based BankAmerica Corp. and NationsBank agreed to a $65-billion merger to form the largest national bank. On the same day, Banc One Corp. announced plans to buy First Chicago NBD Corp. for about $30 billion in stock.

“We do not believe that the proposed mergers create a need for responsive action by Congress,” said John D. Hawke Jr., Treasury undersecretary for domestic finance. “The banking industry is still far from being highly concentrated,” he said.


Wednesday’s session was the first formal hearing in Congress since the announcements of the mega-mergers, giving both legislators and regulators the chance to offer their views. Although it was clear that big banks won’t win any popularity contests, the mergers seem likely to go through without major alterations.

The share of bank deposits held by the top 10 banking firms has jumped from 19% in 1980 to 30% in 1997. But the only nationwide limit in federal law is a 10% ceiling for deposits in any single organization.

The proposed BankAmerica-NationsBank combination would produce an institution with about 8.5% of total deposits, well within the limit.

There is a complex system for calculating concentrations in local markets, and the government is likely to require the merged bank to divest some branches in some states. But the overall deal seems likely to win the approval of regulators.

Banc One and First Chicago also seem certain to gain approval, though again the divestment of some branches may be required.

Members of the committee from both parties expressed irritation and, in some cases, hostility toward banks.


In California, people are “extremely concerned about these mergers” because of fast-rising ATM fees and a lack of branches in moderate-income and poor neighborhoods, said Rep. Lucille Roybal-Allard (D-Los Angeles).

“The message to the banking industry is, ‘Don’t forget about the consumer,’ ” said Rep. Michael N. Castle (R-Del.).

The only big merger with potential regulatory problems is the proposed combination of a big bank, Citicorp, with a major insurance and securities firm, Travelers Group Inc. Under current law, a bank holding company cannot own an insurance firm.

The strategy by the merger partners would be for Travelers to apply for a bank holding company charter, according to a congressional staff source. The Federal Reserve Board could approve the charter and give Travelers two years to get rid of the insurance business. The Fed could also give Travelers three one-year extensions. That gives the companies five years to try to persuade Congress to change the law and allow the bank to be in the insurance business.