With eight days left for public comment, the branching battle is spreading.
Since the Federal Home Loan Bank Board proposed on Feb. 21 that District savings and loan associations be permitted to establish branch offices in the Washington suburbs, more than 1,200 persons have written the agency to cheer them on.
Last Wednesday, the Maryland Savings and Loan League counterattacked with a broadside against the big city mortage lenders, charging them with dereliction in the District. Next week, reinforcements for the urban institutions are anticipated from the Metropolitan Washington Savings and Loan League.
The battle is being observed not only by the protagonists and the surrounding region but also by the financial community as a whole. For though it would appear to be a local conflict, it is viewed by many as the opening salvo in a campaign to allow nationwide branching. They reason that if federal regulators allow D.C. thrift institutions to branch into suburban Maryland and Virginia, it is only a matter of time before interstate branching will become a fact in major metropolitan areas across the country. And if the thrifts can do it, so must the commercial banks. The evitable outcome of this fray, according to the Davids, is that U.S. banking will wind up in the hands of a few Goliaths.
No new branching of D.C. thrifts into the suburbs has been approved since 1955. As a consequence, only three out of 16 District S&Ls have branches in nearby Maryland, acquired before then. The growth of the suburbs and resulting decline of the inner city, plus the construction of the Metro System, all have whetted the D.C. thrifts' desires over the years for expansion. The decisive factor appears to have been the move within the past year and a half of a large Baltimore thrift into Montgomery Mall. With the prospect of more competitors camped at the gates of the Nation's Capital, the D.C. thrifts have geared up for battle.
Their executives sent letters to customers appealing to their sense of convenience. "Why should not National Permanent be permitted to fully serve you by having facilities near you as do Peoples, Sears, and Woodward and Lothrop?" National Permanent chairman John W. Stadtler wrote. "There can be no question that regardless of state and federal boundaries, the metropolitan area is one business and social unit." Customers were asked to voice their support to the bank board.
By mid week, 1,225 persons had written, more than on any other issue in recent years, according to Mary Porter of the bank board. Many of the correspondents simply penned "I agree" at the bottom of the form letter sent by their S&L. Sixteen dissenters were recorded, ranging from Col. Ray W. Whitson of McLean, who saw no reason why his S&L should extend its poor service to the suburbs, to W.C. Graeub of Chevy Chase, who claimed S&Ls would concentrate on new markets in the suburbs at the expense of the District, that mergers would leave the money supply in the hands of a very few, and that rates would become less competitive and service less personal.
Graeub's arguments were similar to those expressed by S&Ls opposed to branching. Of the 35 letters received from federally chartered thrifts, about half were in favor, whereas only 3 of 23 comments from state-chartered thrifts were positive. Home Federal Savings and Loan of San Diego advocated nationwide branching, saying it would "increase competition and delivery of services at the lowest cost." more typical was this letter from Equitable Federal Savings and Loan of Fremont, Neb.: "The concern is . . . the possibility or probability that, once the door is open, the next move would be interstate branching. I believe the greatest fear of savings and loan operators is facing a branch operation in every Sears and J.C. Penney outlet across the country."
The FHLBB also is soliciting comments on, among other things, whether institutions should be able to enter the District and whether the number of and method of establishing branches should be limited. Yet these questions have been virtually obscured by the issue of big thrifts invading the territory of small ones.
The Maryland Savings and Loan League counterattacked by challenging the D.C. thrifts' contention that they need branching to get access to mortage money that could be sent to moderate-income and low-income families of the inner city. "If it is really a shortage of lendable funds which is keeping the supply of mortage credit to the District at a low level, then why are the D.C.-based associations lending two-thirds of their funds into the wealthier suburban areas of Maryland and Virginia?" asked league President Charles H. Kresslein Jr.
He cited figures filed under the Home Mortage Disclosure Act that show that the 16 thrifts made 34.6 percent of all their loans in the District in 1977-78. Of that amount, only 6.8 percent was lent in Anacostia. The only two associations which lend the bulk of their funds in D.C. are minority associations.
Ralph S. Childs Jr., president of the Metropolitan Washington Savings and Loan League and of Home Federal Savings and Loan in the District, responded by saying that D.C. lenders are meeting the legitimate needs of the community and that they are making more loans in the city in proportion to deposits than they are in the suburbs. However, he continued, net deposits in the District were down last year by $118 million after discounting credited interest, and contiguous commuters are investing less of their money in D.C. thrifts, so branching is necessary in his opinion.
Childs espoused reciprocity, but added that he doubted many Maryland and Virginia S&Ls would want it because they would have no desire to "honor their commitment" (under the Community Reinvestment Act) to lend in the inner city. Asked if D.C. savings and loans present unfair competition to suburban thrifts, Childs replied that several Maryland S&Ls are larger than most District S&Ls, Perpetual excepted. And he added, "I'm a great free enterprise person. If we can do it better, then they deserve to be merged."
Final comments are due by April 16. But the Federal Home Loan Bank Board is expected to take its time on declaring the winner in this battle, according to a staff attorney.