The bruising fight over New Haven Savings Bank's conversion to stock ownership continues to reverberate in Connecticut.
The state Senate's majority leader has introduced a bill that would authorize the banking commissioner to order a depositor vote in future conversions.
Had such a vote been held in the case of the $2.4 billion-asset New Haven Savings, depositors might have nixed the switch. Hundreds of them attended each of two public hearings and blasted the plan.
Banking Commissioner John P. Burke, who approved New Haven Savings' application, said Thursday he opposed the bill, sponsored by Sen. Martin L. Looney, D-New Haven.
In testimony before the Senate Banks Committee, Mr. Burke called the bill unnecessary and said his Department of Banking has all the power it needs to oversee conversions.
In fact, he told lawmakers, requiring such a vote would make it easier for an outside depositor to pressure one of the state's remaining 22 mutual thrifts into converting. He noted that under current law the commissioner has the final say over such applications.
The legislation would not affect New Haven Savings' conversion. The company is on schedule to complete its initial public offering next month and acquire two in-state rivals, Alliance Bancorp of New England in Vernon and Connecticut Bancshares Inc. in Manchester.
Local residents, New Haven Mayor John DeStefano Jr., and virtually all the city's representatives in the General Assembly, including Sen. Looney, fiercely opposed the conversion plan.
In his testimony before the committee Thursday, Sen. Looney said the controversy "exposed some inadequacies in our current statutes and regulations." A mutual's depositors, "the people who build up an institution and support it over the years," should have a say in determining its future, he said.
Sen. Looney quickly added that he approved of the way the commissioner had handled the application. Before Mr. Burke consented to the conversion, he required New Haven Savings to scale back its planned stock incentives for directors and management and to endow a charitable foundation, the lawmaker said.
But changes are needed to ensure that "a less responsive and engaged commissioner would not be able to ignore community concerns," Sen. Looney said.
A spokesman for New Haven Savings did not return calls seeking comment.
Currently a conversion application needs approvals only from the commissioner and the thrift's board of corporators. (This board is entrusted with approving any changes to an institution's charter. Connecticut requires banks, thrifts, hospitals, and certain other state-chartered corporations to have them.)
America's Community Bankers, which represents more than 600 mutual thrifts, also opposes Sen. Looney's bill.
Charlotte Bahin, the trade group's senior vice president for regulatory affairs, agreed with Mr. Burke. Outsiders - or even locals with a vested interest in getting an institution to convert and sell stock - would have an easier time manipulating depositors in a conversion vote than they would persuading a banking commissioner, she said.
The bill would "create a situation in which the motivation for conversion likely would be driven by pressure to convert applied by those persons seeking a windfall ... rather than the best interests of the mutual bank and the community it serves," Ms. Bahin said.
Sen. Looney countered that "on balance" it was more important to ensure that depositors play a part in future decisions.
A vote by the Banks Committee, as yet unscheduled, would be the next step for the bill.
A bill introduced in the Massachusetts General Court last year would have required converting mutual thrifts to distribute their capital to depositors before a stock sale. Ms. Bahin said that bill, which died in committee, would have made conversions more likely by giving depositors a monetary incentive to lobby for them.
