Point counterpoint.

The Federal Reserve Board this month approved First Hawaiian Inc.'s purchase of Pioneer Federal Savings Bank in the bank's hometown of Honolulu.

Since First Hawaiian, at $7 billion of assets. is the state's second-largest bank company, and Pioneer the second-largest thrift, questions arose about the effect on competition. Some local thrifts and credit unions also objected to the deal.

The majority of the Fed governors approved the merger, however, saying its public benefits would outweigh any adverse effects. The board also noted that the Justice Department did not object.

Two governors filed statements that spelled out some central issues of the debate.

Statement of Governor John LaWare:

I dissent from the board's action in this case.

This is the second acquisition in Hawaii for First Hawaiian Inc. within the last 2 1/2 years.

While I voted in favor of the acquisition of First Interstate of Hawaii, also of Honolulu, by First Hawaiian, I felt at the time that the proposal represented the upper limit of permissible concentration in these highly concentrated banking markets.

This acquisition [of Pioneer Federal] would further substantially concentrate the already highly concentrated Hawaiian banking markets and, when viewed in light of First Hawaiian's previous acquisition, represents in my view a significantly adverse lessening of competition.

The anticompetitive effects of this trend are particularly troubling in light of the barriers to potential competition imposed by Hawaii's decision not to permit interstate banking acquisitions.

I am also unable to find any significant competitive developments in these markets that would mitigate my concerns. I would therefore deny these applications.

Statement of Governor Wayne Angell:

I concur in the board's decision in this case.

While I dissented from the board's decision to approve a previous acquisition by First Hawaiian, I believe that a number of factors differentiate this case and, and balance, warrant approval of this proposal.

First, since the last acquisition by First Hawaiian, a major commercial bank holding company [Bank America Corp.] has entered the five Hawaiian banking markets.

Entry of this bank holding company should increase competition and indicates a method by which others may enter into the Hawaiian banking markets.

In addition, unlike the previous case -- which involved the acquisition of a bank -- Pioneer Federal Savings Bank ... is a thrift institution that, while having the authority to engage in commercial lending, is not actively engaged in commercial lending.

Thus, First Hawaiian's acquisition of Pioneer should increase the availability of small-business loans and other types of commercial loans in the Hawaiian banking markets.

For these reasons and the reasons stated in the board's order, I believe that consummation of this proposal would not have a significantly adverse effect on competition in any of the Hawaiian banking markets.

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