A Moment in Bank History

Gene Swanzey: Interstate Efforts in 1985


Given that Art Ryan will be the Alumni guest next October, his appearance reminds me of Chase’s Interstate Banking efforts back in the 1980s. The bank received a telephone call on a Sunday afternoon in March1985 from the head of the Federal Reserve District that included the State of Ohio. She stated that the Ohio Insurance Fund went bankrupt and could no longer support their savings and loan members. The Federal Reserve "suggested" that other money center banks interested in expanding products and services across state lines were also called. It was a time when out-ot-state banks could not take deposits from out-of-state customers: Federal law and most state laws prohibited out-of-state deposit taking. 


Within hours, a Chase team was quickly put together by Art. The team primarily included Mike Esposito, Tim McGinnis and myself, as Director of Government Affairs. This invitation to enter Ohio to save the State Insurance Fund, however, did not include an assurance of overturning prohibitive Ohio state law or equally prohibitive Federal constraints. 


Addressing the crisis amounted to buying large savings institutions that were a drain on the State Insurance fund. This required identifying which institutions to acquire, negotiating with those institutions, amending state law in order to allow acquisitions by out-of-state commercial banks, and dealing with Federal regulators and legislators to explain the necessary steps that needed to be taken to save Ohio's savings bank industry by saving the Insurance Fund.


A look back will confirm that Ohio's crisis and the outcome of this crisis was one of the first major, if not the major, blows to interstate banking prohibitive laws. A mirror image of Ohio's crisis came a couple of months later in Maryland. The rest is now history, whereby banks of all sizes cross state lines at will to garner new customers. Hard to believe that Chase executives 34 years ago could look from 1 Chase Plaza into New Jersey but were not allowed to take deposits to help fund their loans to Garden State businesses.


To this day, I applaud Art, Tim, Mike and others involved. The quick action and leadership of these Chase executives was truly historical and noteworthy.


Federal law was eventually eased, allowing banks to cross state lines. Prior to Federal action, Chase was extremely active in state capitals, lobbying for change. Texas, California, Florida, Illinois and Virginia were the most populous and, therefore, the most active states where we lobbied for change.


–– Gene Swanzey





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From Paul Hemminger: Prior to the statewide expansion that Gene noted, to get a foothold in the other counties Chase opened banking operations in Rochester, Buffalo, Albany, Binghampton, Syracuse, Saugerties and Canton in New York State. We opened de novo operations in Binghampton, Syracuse and Albany. We bought the National Bank of Saugerties, The Caledonia National Bank and Trust Company, The Lincoln National Bank (Buffalo) and The Canton National Bank and Trust Company.  Respectively, the banks were renamed Chase Bank of Eastern New York, Chase Bank of Western New York, Chase Bank of Southern New York, Chase Bank of Central New York and Chase Bank of Northern New York.
At the time I was in the General Audit Department and supervised the pre-acquisition audits of the purchased banks and the ongoing audits of each of the banks until statewide laws changed and all of the subsidiary banks were merged into mother Chase.


From Ken Jablon:

This S&L crises gave Chase banks in Ohio and Maryland. After that, Chase figured out how to own banks in a couple of other states, including Florida. The Chemical merger gave Chase a big Texas network.         The Bank One merger, expanded the bank into a number of states, particularly in the midwest. The biggest expansion was the Washington Mutual takeover. Current laws allow nationwide banking. and JPMorgan Chase has recently been opening de novo branches in a  number of new states.