New York State banking regulators threw a roadblock yesterday in the path of the Middle Eastern investors who have been trying for three years to buy Financial General Bankshares Inc. of Washington.
Overruling New York Superintendent of Banking Muriel Siebert, the state banking board refused to allow the Middle Eastern group to buy control of two New York state banks owned by Financial General, which runs among other institutions the First American banks in the Washington area.
The decision will not end efforts to buy Financial General, said Robert Altman, a Washington attorney who represents the Middle Eastern group.
Altman said his clients are "going to consider their options and have every intention of proceeding." He said the Federal Reserve Board and bank regulators in every other state in which Financial General does business already have approved the takeover.
Altman would not discuss how the Arab group might get around the New York roadblock, but banking industry sources suggested several possibilities.
When New York authorities balked at the purchase of Marine Midland Bank in Manhattan by a Hong Kong bank, Marine Midland simply turned in its New York state charter and became a national bank, eliminating any need for state approval. The Middle Eastern group might take the New York authorities to court or buy all of Financial General's banks except the ones in New York.
The New York rejection came after an intense lobbying campaign in which race and religion were the undiscussed but unavoidable issues.
With the backing of New York Gov. Hugh Carey, Siebert and the agency staff urged approval of the takeover. The opposition was lead by Manfred Ohrenstein, Democratic minority leader in the New York state senate and an outspoken foe of Arab interests.
An aide to Ohrenstein, Joe Polser, denied the underlying issue was Arabs versus Jews, but added, "I would definitely say it is an anti-Arab move."
"Ohrenstein has said the policies of these countries have been hostile to the United States," the spokesman noted. "He believes we shouldn't be giving them a foothold in American banking institutions, letting them buy their way in with petrodollars."
The New York bank board has 12 members--six from the banking industry and six from the public--and requires eight votes to approve a bank acquisition. Only 10 members voted yesterday, and they split 5-5.
Two union representatives on the board voted against the purchase, saying their chief objection was that Middle Eastern countries do not let Americans buy banks in their countries, so the U.S. ought to respond in kind.
Another objection raised by Ohrenstein was the links between the investors who want to buy the banks and foreign governments. The investor group includes Sheik Kamal Adham, former chief of intelligence in Saudi Arabia and an adviser to the royal family of that country; Faisal Saud al Fulaig, former president of the government-owned Kuwait Airlines; and Abdullah Darwaish, financial manager for the royal family of Abu Dhabi.
The group already owns about 20 percent of the stock of Financial General and has announced plans to make a public offer for the remaining stock. Financial General officials, who could not be reached for comment yesterday, have endorsed the offer.
Financial General owns the controlling interest in a dozen banks, including Bank of Commerce in New York City and Community State Bank in Albany.