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
A New Series
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From Ken Jablon: