The Supreme Court's decision yesterday to hear a case involving regional banking in New England will affect about 30 states, including the District, Maryland and Virginia, that have adopted or are contemplating such arrangements.
By agreeing to hear the case, the high court cast a cloud over the constitutionality of the exclusionary compacts that states can make with one another. These pacts have been formed to keep out banks from New York and California, the states with the greatest number of money-center, or large, banks. Their purpose is to allow regional or medium-sized banks to grow enough through interstate mergers to mount a competitive challenge to the money-center banks.
After the Federal Reserve agreed to a merger between the Bank of New England and Connecticut Bank and Trust, Northeast Bancorp, which is based in Connecticut, and Citicorp sued. An appeals court ruled against Northeast and Citicorp. Yesterday a Citicorp spokesman said "we are gratified that the Supreme Court will review this important issue and hopeful that the outcome will reaffirm the constitutional protection against discriminatory compacts by some states to the detriment of others and of the nation as a whole."
D.C. Mayor Marion Barry is expected to receive legislation within a week to create an accord allowing banks in Maryland, Virginia and the District to acquire banks in each others' jurisdictions. Reciprocal arrangements would be sought later with other southern states: Alabama, Florida, Georgia, Louisiana, Mississippi, North and South Carolina, Tennessee and West Virginia.
Pauline Schneider, director of intergovernmental relations for the D.C. government, acknowledged that the Supreme Court review could make the legislation controversial, but said she expects a ruling before the City Council takes final action on the bill.
When the Virginia General Assembly convenes this month, a similar measure will be introduced there. It calls for reciprocity between 13 states, including Kentucky. Sid Bailey, Virginia's commissioner of financial institutions, said yesterday he thinks that the bill will pass. It has the support of the Virginia Bankers Association.
Maryland's legislative effort calls for four years of regional banking, followed by full interstate banking. States named in its pact are Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Missippi, North and South Carolina, Tennessee, Virginia, West Virginia and the District.
Nine states already have signed regional banking agreements, most of which are exclusionary. Twenty other states are scheduled to consider bills in 1985.