WASHINGTON - Banking regulators are expected to approve the blockbuster merger of Chemical Banking Corp. and Chase Manhattan Corp., but not without a fight from community activists.
By virtue of its sheer size and its impact on the New York City market, the deal is likely to spark protests under the Community Reinvestment Act.
Representatives of community groups said they will carefully evaluate the merger's impact on inner city neighborhoods, small businesses, and consumer fees and services. They expect the deal to get considerable scrutiny from the banking agencies.
"We're hoping that the regulators will really go through it with a fine- tooth comb," said Matthew Lee, executive director of Inner City Press/Community on the Move, a New York-based community group.
The group has been loudly protesting Chase Manhattan's alleged lack of interest in low-income and moderate-income neighborhoods, and has no plans to stop. It managed to slow down - but not thwart - several recent applications by Chase.
Sarah Ludwig, director of Neighborhood Economic Development Advocacy Project in New York, expressed concern about bank branch closings, "especially in already-underserved neighborhoods."
Another big concern is that the merger will lead to higher fees and services for consumers.
"Bigger is not necessarily better for New York consumers," said Stephen Brobeck, executive director of the Consumer Federation of America. "I've seen no evidence that mergers like this one benefit consumers in any way. In some communities there will be less competition. That pushes up fees and loans rates and increases inconvenience."
The New York chapter of the Association of Community Organizations for Reform Now, or Acorn, saw another potential problem. New York City gave Chase Manhattan $400 million in subsidized loans and tax breaks to keep bank jobs in town, the group said, noting that the two banks now plan to cut 12,000 jobs as part of the merger.
"We want to see if this merger violates the letter or spirit of deals these two firms had with the city," said Felix Maldonado, vice chairman of Acorn in the Bronx.
Banking industry lawyers said they expect federal regulators to listen to community groups - and then approve the merger.
"The chances of a successful Community Reinvestment Act protest are very, very small," said Michael Greenspan, a partner with the law firm of Thompson & Mitchell in Washington.
The Federal Reserve Board, which must approve mergers of bank holding companies, "places a tremendous amount of weight on the existing CRA ratings of the banks involved," Mr. Greenspan said. That of Chase Manhattan, stemming from an October 1993 exam by the Office of the Comptroller of the Currency, is "satisfactory," while Chemical's, dating from an August 1993 exam by the Federal Reserve Bank of New York, is "outstanding."1
The combined bank will be the nation's largest, and will be the leader in the New York-area market. But "it really is an unconcentrated market," said Gil Schwartz, a partner in the Washington law firm of Schwartz & Ballen. "I would think the antitrust implications wouldn't be very significant."
Mr. Greenspan agreed, but said Chase might have to divest some assets to please Justice Department antitrust lawyers concerned about smaller market segments that would be dominated by the combined bank.
Meanwhile, a key member of Congress announced Monday that she plans to hold hearings into the increasing number of large-bank mergers.
Rep. Marge Roukema, R-N.J., said the oversight hearings will help "ensure that the law is being carried out properly, keeping the safety and soundness of the banking industry in mind."
Rep. Roukema, who heads the House Banking subcommittee on financial institutions, said she wants to analyze the effect huge mergers will have on the implementation of the new interstate banking law.
