WASHINGTON -- In a closed-door meeting today, Federal Reserve officials are expected to consider overturning their denial of an acquisition bid by Shawmut National Corp.
If the board votes in favor of both reconsidering and reversing its earlier decision, Shawmut could receive the green light on its plan to acquire New Dartmouth Bank of Manchester, N.H., as early as this afternoon.
The Fed caught the lender off guard last November, when it decided that a Justice Department investigation into discrimination at Shawmut, as well as widespread inaccuracies in lending data, warranted denial of the bid. The board rarely votes against such applications, and it does so even less often on fair-lending grounds.
Split Decision
But clearly this case has been unusual. First, the decision was split: three to three, with one governor abstaining. The board prefers to cast unanimous votes.
And while banks are always given a few days to appeal a board decision, the Fed gave Shawmut three months. After the appeal -- which was made after Shawmut settled with the Justice Department and cleaned up its lending data -- the Fed announced it would delay action until as late as May.
Shawmut believes it has answered the board's concerns and the vote should be reversed.
But the Fed, if it reverses its earlier vote, could open itself to criticism. After years of attacking the Fed for what they called lax enforcement of fair-lending laws, some saw the Shawmut denial as a sign of a tougher stance. That impression won't hold, they said, if the vote is reversed.
Two separate actions would be required for the Shawmut deal to go through. First, the board must decide to reconsider the decision -- an action that has clearly received careful consideration, given the lengthy review of the request.
If the board agrees to reconsider, it must then vote on the deal. That could be done immediately or postponed.
