Big banks in the mid-Atlantic region are conspicuously absent from the list of bargain hunters seeking to advance their interstate strategies by buying financially shaky Maryland-insured savings and loan associations.
The absence of D.C. banks from negotiations for those S&Ls is made more conspicuous by the fact that setting up banking operations in Maryland has been a goal of several of those institutions for some time. But there is little indication that banking firms in the District are willing to bid for troubled Maryland S&Ls to achieve their aims.
Reports filtering out of Annapolis indicate that it's possible to buy a Maryland S&L for as little as $4 million, a fairly small price to pay for what amounts to the right to establish a commercial bank in the state.
Management problems and the near collapse of two Maryland S&Ls sparked a run on some of the state's formerly privately insured institutions, and the crisis that followed caught several in a backwash that threatens their existence. Several of the state's S&Ls, unable to obtain federal insurance as required under emergency legislation passed last spring, are a step away from the auction block. The only other alternatives are to merge or cease operations.
To be sure, the purchaser of a Maryland S&L could not convert it to a commercial bank unless the state enacts a new law permitting such action. But given the eagerness of state officials to clean up the S&L mess as quickly as possible, special legislation is virtually assured.
Chase Manhattan Corp., at least, is counting on passage of just such a law. Chase has made no secret of the fact that it hopes to get a jump on other banking giants that also want the right to bank in Maryland. It can accomplish that, of course, by acquiring some of the state's troubled S&Ls. There are indications that other big out-of-state bank companies may follow the same path to leapfrog into Maryland banking.
Indeed, by buying a Maryland S&L that can't qualify for federal insurance, an out-of-state bank could conceivably get a jump on banks from states that have agreed to join Maryland in a regional interstate banking pact.
Earlier this year, Maryland enacted reciprocal banking legislation, aligning it with the District, Virginia and 12 other states, mostly in the Southeast. Bank companies from the region may acquire or merge with Maryland banks as long as the home states of those institutions extend similar privileges to Maryland firms. Thus far, only Bank of Virginia has made a move under the reciprocal arrangement by agreeing to take over Union Trust Bancorp of Baltimore.
A companion bill adopted last spring permits out-of-state banks to open so-called limited-purpose banks in Maryland and convert them to full-service operations, beginning in 1986. The conversions can take place only if out-of-state institutions agree to meet certain investment and employment requirements, however.
New York's Citicorp, which played a pivotal role in enactment of the special law governing limited-service banks, plans to build a credit-card processing center in Maryland and hire at least 1,000 persons, in exchange for the right to bank statewide.
What this all means, then, is that Maryland, having opened three avenues to out-of-state banks in less than three months, has become a hotbed for interstate deals.
This has strong implications for District banks, which are powerless at the moment to enter into mergers with others in the region. Two D.C. banks have agreed to be bought by Virginia bank companies but those agreements are worthless as long as D.C. government officials are unable to agree on a reciprocal banking bill. And bankers can't really be certain that the District will pass reciprocal banking legislation next fall without further political haggling.
In the meantime, the Maryland S&L crisis may provide a clue to the course D.C. banks are prepared to take, either as passive players waiting to be taken over eventually, or as activists prepared to seize opportunities in a familiar market.
Chase and other big out-of-state banks are strongly pursuing opportunities springing from Maryland's S&L crisis. Could it be that Chase knows something that D.C. banks don't? Or is it possible that D.C. banks know more than Chase does about the situation in Maryland?
One thing is certain. Virtually every banker east of the Mississippi knows why Maryland figures so prominently in the interstate strategies of so many big banks. Access to the Baltimore-Washington corridor is key. With nearly 6 million persons and more than 2 million households, the corridor is the nation's fifth-largest consolidated area. Moreover, the area's high personal-income level makes it one of the most affluent.