Two large New York banks refused to promise the D.C. Council yesterday that they would invest millions of dollars in the community and create hundreds of new jobs in exchange for charters to set up banks here.
Chemical New York Corp. and Bankers Trust New York said they would comply with "the spirit" of the council's newly enacted banking law requiring such investment but said they were not bound by law to follow it to the letter.
The banks said that while they intend to invest in the community, their D.C operations will not be large enough to justify an investment of the magnitude prescribed by the new law.
The bank holding companies are among 11 companies applying to the Comptroller of the Currency for charters in the District.
The companies filed their applications before April 11, when the newly enacted law transferred to the D.C. Council the right to issue such charters.
In addition to shifting chartering power from federal to D.C. government, the law also requires that any company setting up or acquiring a bank in the District comply with the council's community investment requirements.
The applicants filed while the comptroller still had authority over charters, under an obscure 85-year-old federal law pertaining to banks in the District.
In doing so, the applicants bypassed the council's investment requirements as well as the uncertainty of how the D.C. government would react to their requests.
Councilwomen Charlene Drew Jarvis (D-Ward 4) and Betty Ann Kane (D-At large) grilled representatives of six of the applicants during a four-hour hearing of the council's Committee on Housing and Economic Development, the committee that drafted the new law.
Kane said she was "appalled" to learn a loophole could allow the largest banks in the nation to set up new banks in the District without fulfiling the council's investment rules.
The loophole was discussed repeatedly but was viewed as a serious threat by council members when they were drafting the new local law, aides to Jarvis have said.
The Industrial Bank is the District's only locally chartered bank.