Citicorp, which owns New York's biggest bank, had announced last March that it planned to move its credit card operation to South Dakota to take advantage of the absence of interest-rate ceilings in the Plains State.
Jon S. Reed, Citcorp's senior executive vice president, said the company hoped to "celebrate the Fourth of July in Souix Falls, S.D."
But neither Citicorp, nor its planned new subsidary, Citibank South Dakota, will see the fireworks in Souix Falls Friday.
The Federal Reserve Board and the comptroller of the currency so far have not given their blessing to Citicorp's application to set up a subsidary bank in South Dakota to run its Master Card and Visa operations. Citibank has nearly 6 million credit cards outstanding.
New York, for its part, has no desire to see Citibank's card services- nor -- nor the 2,500 jobs they provide -- leave the state.
The State Senate already has passed a bill that eases New York's usuary law. Under the Senate bill, banks can charge consumers 18 percent interest for the first $1,250 outstanding balances and 16 percent on the rest. Before, it was 18 percent on amounts less than $500 and 12 percent on the total balance if it was $501 or more. Furthermore, the bill also establishes a special review board that will re-examine the usury ceiling if interest rates climb sharply as they did early in the year.
Even with the markedly lower interest rates in effect today, the bank says it loses money on its credit card and consumer loan operations.
The lower house, the State Assembly, has not taken any action, although two of its committees will hold hearings on the usuary ceilings Wednesday.
Citicorp, in the meantime, is playing cagey.
It owes a debt to South Dakota. Whether the threat to move to South Dakota was a real one or a political one, the state went to great trouble to suspend its legislative session in order to write the special law necessary to invite the giant bank into its state.
South Dakota's actions were not altruistic. The state wanted desperately the jobs Citicorp could provide.
But Citicorp is a huge New York institution that would feel much political and social heat if it moved a large chunk of its operations to the other side of the Mississippi. It would rather keep most of its card operations here, if it can get the deal it wants.
Citicorp has rented space in downtown Souix Falls and is looking for cheaper quarters in an indstrial park. The bank has committed itself to employing at least 400 Dakotans if it gets federal approval. Even if the bank should not move its entire credit card operations to South Dakota it could do much of its processing there. Most of Citibank's credit card customers live outside New York (about 80 percent) and a central processing location might make the mail problems eaiser.
By starting up an operation, the bank leaves itself in a good political position, according to New York banking sources. The State Assembly will not act on a bill before the November elections, most observers say, and by then, Citicorp should have something in place in South Dakota.
If it does not get what it wants -- and the bank is not saying just what it will take to keep its credit card operations in New York -- its threat to move would be more believeable in November.
The Fed and the comptroller could put a kink in Citibank's maneuverings, however: They could quash the whole idea.