Bank of America Hinders Lobbyists... Effort to Alter Limiting Federal Law
By Eric Dash
THE NEW YORK TIMES
Bank of America’s chairman and chief executive, Kenneth D. Lewis, said Tuesday that the company was backing away from a quiet lobbying effort to change a federal law that could prevent it from making major acquisitions.
Just weeks after agreeing to initiate discussions with lawmakers to raise the possibility of lifting the 10 percent federal deposit cap, Kenneth D. Lewis said that he had told bank representatives to “back off” from those plans.
“I thought we had gotten out there a little too far in terms of our level of aggressiveness, and it sent the wrong signals,” Lewis said in an interview on Tuesday. About two weeks ago, he made the decision to halt the political effort, he said.
Bank of America, which has about $693.5 billion, or just over 9 percent of the nation’s deposits, had argued in a position paper that the law restricting a bank to no more than 10 percent of the nation’s deposits is “antiquated, conceptually flawed” and anti-competitive.
While American banks are prevented from increasing their deposit base through acquisitions that might push them over the federal threshold, foreign banks face no similar restrictions. The bank also argues that the law is unnecessary because of antitrust laws, state regulations and market forces.
But as the only bank near the 10 percent limit, Bank of America has found itself with virtually no allies. JPMorgan Chase, the next largest deposit holder, could acquire all but the five biggest banks and still remain under the federal cap. Wachovia, Wells Fargo and Citigroup, the next banks in line, have potentially even more room and time.
Smaller community banks, meanwhile, have vowed to fight any move to lift the cap.
A Wells Fargo spokesman said the bank also opposed lifting the cap, preferring to stick to its internal growth strategy that does not come close to hitting the limit. JPMorgan declined to comment, while Wachovia and Citigroup said they had no position on the subject.
On Capitol Hill, the proposed change has met with a lukewarm reception. Rep. Barney Frank, D-Mass., who heads the House Financial Services Committee, has suggested that lifting the cap may be part of some sort of “grand compromise” between Wall Street and Main Street interests. There does not appear to be much enthusiasm, but other lawmakers have not dismissed the idea out of hand.
Bank of America’s backpedaling is either the recognition of a rare misstep or a shrewd calculation for Lewis, who is known for his deliberate approach to corporate strategy.
On the one hand, reports of the plans were a reminder of the bank’s bigger ambitions, leading to speculation that it was setting the stage to engage in a major deal. On the other, it may be a way of taking the temperature of a new Democratic-controlled Congress while planting the idea in people’s minds. Typically, it takes years to pass legislation to repeal banking laws like those governing interstate banking.