2 Governors Dissent on CRA Grounds As Fed Approves Northern Trust Deal

WASHINGTON - In a highly unusual move, two Federal Reserve Board governors dissented on Community Reinvestment Act grounds from the central bank's decision late Wednesday to give Northern Trust Corp. of Chicago permission to acquire a Florida institution.

Fed Vice Chairman Alan Blinder and Gov. Janet Yellen, both appointed by President Bill Clinton, wrote in a two-page dissent that the central bank should have delayed action on Northern Trust's bid for Beach One Financial Services Inc. of Vero Beach, Fla.

Northern Trust, the parent of Chicago Bank, is under investigation by the Justice Department for violating the fair-lending laws from 1992 to 1994.

"We believe it is wise to wait a short while for more pertinent information," the two wrote.

The two wrote that within the next few months the bank should be resolving its dispute with the Justice Department and filing a Community Reinvestment Act status report with the Fed.

"These two pieces of information, we believe, would put the board in a much better position to make a determination," the two wrote.

The dissent elated community activists. "It is significant that the two newest Fed governors are starting to express a view to the board, which is something we have been waiting for," said Allen Fishbein, general counsel of the Center for Community Change.

But banking analysts were more sedate. "It is an indication of sensitivity," said Karen Shaw, president of ISD/Shaw Inc. "But, the application has progressed."

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