D.C. Mayor Marion Barry said yesterday that he will use his veto of interstate banking legislation as leverage to get local banks to make more investment commitments for District neighborhoods and that he is willing to work with the City Council on a compromise bill.
"The veto is an effort on my part to tie down some more concrete proposals that benefit the community," Barry said. "After the bill is signed and they local banks get their mergers, what kind of leverage do you have outside of good will?"
Barry said some local banks have repeatedly failed to demonstrate that they are willing to make substantial investments in minority businesses and economic projects in distressed areas of the city.
The City Council needs eight votes to override the mayor's veto and has 30 days to do so. Barry said he hopes that the council will not rush to make a decision and hinted that he might be receptive to joining the council in a veto override if a new interstate banking bill is considered.
Meanwhile, Barry denied an allegation by City Council member Charlene Drew Jarvis (D-Ward 4) that he had made an agreement with her to support the legislation adopted by the council while she continued efforts to work out a compromise with the banking community and Citicorp, the giant New York bank that is lobbying city officials for a District banking license.
Jarvis said yesterday she supports overriding the mayor's veto, while City Council member Frank Smith (D-Ward 1) said he believes the mayor would have enough votes to sustain the veto.
The legislation adopted by the council in a 10 to 0 vote would allow District banks and banks in 11 southeastern states to merge and acquire each other. Barry, who introduced the bill, vetoed it because it did not contain provisions that would grant banking licenses to any bank outside the region after two years or after a bank has made a substantial investment commitment toward economic development in the District.
Citicorp has offered to provide the District with $100 million in small business and neighborhood loans in exchange for a District banking license, which would allow the bank to collect deposits here. Barry said he is not lobbying for Citicorp, but he added, "I don't think you can scoff at $100 million."
Jarvis said that Barry's view is "all or nothing" and that she is confident that a compromise can be reached by allowing banks outside the 11-state region to enter gradually while providing local banks the protection they need. She also said that local banks are willing to increase their investment commitments.
Local banks have objected to the mayor's proposals, saying that Citicorp and other large banks would create unfair competition for the local banks. In a letter sent to council members yesterday, Daniel J. Callahan III, chairman of American Security Bank, said that his bank would "make all the viable loans that can be identified" in distressed areas of the city.
"The mayor's veto of the banking bill . . . is a setback to the entire Washington business community," Callahan wrote. "It is a signal that businesses who have been here for years will not be given the opportunities to expand."
Prior to vetoing the banking bill, Barry asked local banks to outline their commitments regarding minorities in procurement, lending practices, members of boards of directors and banking services. Pointing to a stack of responses from 10 local banks, Barry said, "superficial is an understatement."
The city's Office of Equal Rights supplied Barry with a report indicating that of the 385 board members at 24 local banks, 56 are minorities and 35 are women.
Regarding their willingness to increase banking services to under-served areas of the city, local banks' responses varied.
Small banks such as National Enterprise Bank, which opened in 1983, said it would be difficult for them to expand their operations in the near future.
NS&T Bank said it is developing "lifeline" checking account services at reduced rates for residents unable to afford the current checking accounts available in the city.
D.C. National Bank said its planned merger with Sovran Financial Corporation would allow it to expand its banking locations and some services, including home mortgage loans. CAPTION: Picture, MAYOR MARION BARRY . . . won't "scoff at $100 million"