Raul Masvidal's version of how Miami became a busy international banking center skirts a few details but does hit the essential points:
Members of Miami's Cuban commmunity visited wealthy friends in Latin America and encouraged them to deposit their money in banks in Miami, where there was no threat of a government overthrow that could endanger bank deposits. Since one Latin American nation or another always seemed to be in the throes of political instability, the money kept flowing in. s
Consequently, perhaps $4 billion in Latin American "flight capital" today is being channeled through Miami's financial institutions such as Masvidal's Biscayne Bank, according to reliable estimates. The funds pouring in from Latin Americans seeking secure places to deposit their wealth has spurred a proliferation of international banking agencies, particularly Edge Act institutions.
In the past three years, the Edge Act banks -- so named because they are subsidiaries of American banks limited primarily to international activities under legislation that was called the Edge Act -- have more than tripled their total assets to $2.2 billion, according to the Federal Reserve Bank of Atlanta.
"Banks go where they are welcome," said Cyril S. Spiro, vice president and manager of Bank of American International, the second-oldest Edge Act bank in Miami.
"In two years, I have witnessed the virtual transformation of Miami from a regional banking town into a developing international financial center," he said.
There are now more Edge Act banks opened or approved in Miami than in New York, according to the Federal Reserve Bank in Atlanta. Although assets of New York Edge Act banks are many times greater, the message is clear for Miami. The business community enjoys having its banks close to the marketplace.
Looking at the growing ties between U.S. and Latin American business, the two largest banks in Washington, D.C., have opened their own Edge Act subsidiaries here. American Security Bank was first and rival Riggs National Bank has scheduled a formal opening of its Miami banking business on tomorrow.
"If you look at the globe, Florida looks like a diving board to the [South American] continent," said Richard J. Rava, vice president of Citibank Interamerican in Miami. "It is three hours to fly to Caracas and [another three] to fly to New York. A Latin [American] businessman can conduct business in his own language here. He can't do that in Chicago or New York."
It is much cheaper to open a branch in Miami and more convenient than an office in Latin America because of inflation and double taxation, Spiro said. For the Edge Act banks, officers and their clients simply shuttle back and forth to conduct the majority of their business, foreign trade and personal banking for nonresidents.
Offices of more than 100 multinational corporations have located here for many of the same reasons.
The Edge Act gets its name from Sen. Walter Edge of New Jersey who, in 1919, sponsored congressional legislation permitting an exception to the rule that banks could not branch outside their own states. Edge Act banking in Florida dates from the late 1960s. The first bank to arrive in 1969 was Citizens and Southern from neighboring Georgia.
Today this bank has been joined by some of the nation's biggest. Besides Citibank and Bank of America, Manufacturers Hanover, Chase, Irving Trust, Morgan Guaranty, Chemical Bank and many others are here, totaling 23 Edge Act banks opened and nine others approved.
Although the largest American banks have Edge Act fleets in Houston, Los Angeles, San Francisco, Pittsburgh and Chicago, Miami is the center for their Latin American trade. Nineteen foreign banks also have arrived in recognition of the city's prime location as a financial conduit to and from Latin America.
"If somebody has got a problem, who does he call? The individual closet to him," Spiro said. "Besides, by being in the marketplace, we can have a better feel for the marketplace. You know how people say that Washington is not in tune with California. We're more in tune with what's happening economically in our region. Being here is different from dropping in every two or three months.
"And let's put aside the drug money," he said. "Because listen, nobody's down here for that. It's blight on this community, and it really is hindering things and has to be resolved because it is putting legitimate business growth in danger."
Miami bankers are particularly sensitive about that subject. About 10 banks are part of a federal grand jury investigation into bank laundering of drug dealers' money.
The Edge Act banks provide loans to finance imports and exports, write letters of credit, clear deposits and perform other chores for correspondent banks abroad and provide international service for smaller local banks. Bank of America arrived 10 years ago primarily to serve import-export clients in the southeastern United States.
Personal banking is big business as well for the Edge Act banks because of the flight capital brought in by well-to-do Latin Americans, the same people who have bought most of the $200,000-and-up condos rapidly under construction on Biscayne Bay just a few blocks from the bankers' offices.
Miami's geographical desirability for these banks has been buttressed by Gov. Robert Graham's determination to internationalize the economy of his state. Florida's International Banking Act of 1977 allowed foreign banks for the first time to open offices and agencies in Florida. Subsequently, the legislature moved virtually to abolish all taxes on international banking.
Those actions, coupled with the expansion of Edge Act activity permitted by the Federal Reserve, have bolstered the entry of even more out-of-state banks into Miami.
Not everyone has put out the welcome mat, however. Worried about new competition, the Florida Bankers Association has consistently fought extension of the out-of-state banks' powers. Last year the association tried quietly to pass a rule prohibiting out-of-state banks form soliciting loan business in Florida. The legislature approved, but Gov. Graham angrily vetoed the entire revised banking code that contained the restriction. He called the legislature back into session, and the new code passed minus the ban. Graham has made it clear he will not accept legislature curbing out-of-state banks.
Although Florida banks fear the invasion from out-of-state, the Edge Act banks "don't compete, we compliment," Spiro contends.
Until recently, Florida banks concentrated on retail transactions and real estate rather than developing international expertise. Yet the growth of Edge Act and foreign banks has acted as a catalyst for local banks to develop business with Latin America, Europe and Africa, according to Gui L. P. Govaert, president of the International Center of Florida.
And where might the next Edge Act bridges from Miami lead? One possibility is an International Banking Facility (IBF) in Florida, a kind of tax-free zone where big banks could conduct offshore business. Under those circumstances, the bankers reason, some of the money placed in affiliates in the Cayman Islands or the Bahamas might come home.