If Bank of America Corp. is ever to convince Congress to relax a 1994 law barring any bank from holding more than 10% of the nation's deposits, sources said, it will need some help from its rivals.
"Until you get four, five banks, maybe six banks who cannot grow because of the cap … that's when I think it kind of gets Congress' attention," said Brian Gardner, a policy analyst at Keefe, Bruyette & Woods Inc.
But B of A's competitors are not lining up.
In fact Wells Fargo & Co., which currently ranks fourth, with $295 billion of domestic deposits for a 4.6 share, opposes a change.
"The deposit cap is really only an issue for one bank in the country, and the cap doesn't limit any bank's ability to grow organically, which is what we think is the most valuable way to grow a deposit base and where Wells Fargo has been most successful growing its deposit base," Howard I. Atkins, a senior executive vice president and the chief financial officer, said in an e-mail.
JPMorgan Chase & Co. ranks second to B of A, with roughly $447 billion of domestic deposits. It declined to comment for this story but could acquire any but the five largest banks and remain under the 10% cap.
Wachovia Corp., which has $376 billion in domestic deposits, could buy any bank but B of A, JPMorgan, or Wells Fargo. A spokeswoman said Wachovia has not developed a position on the issue.
Citigroup Inc., ranked fifth with $226 billion in domestic deposits, refused to comment.
Since B of A first neared the 10% mark after its 1998 combination with NationsBank Corp., its behind-the-scenes efforts to loosen the cap have periodically slipped into the spotlight. The $1.35 trillion-asset financial company made page 1 of the Wall Street Journal last week with its latest lobbying to change the law.
The company, which has about $584 billion in domestic deposits, or roughly 9% of the nation's total, has long sought to add credit union deposits to the overall pool from which the 10% is calculated. But this would only nudge the cap up by $59 billion, to roughly $707 billion.
So in a three-page position paper B of A is circulating, it also suggests adding money market mutual funds to the calculation, which would raise the threshold by $235 billion, to $883 billion.
With a $942 billion cap (if both credit union deposits and money market mutual funds were considered part of the deposit pool), B of A could buy a bank with up to $358 billion in domestic deposits - any but JPMorgan or Wachovia, in other words.
B of A spokeswoman Alexandra Trower said the company is not pushing a particular legislative change to the 1994 Riegle-Neal Interstate Banking and Branching Efficiency Act, which created the 10% boundary.
"There is no specific goal," she said. "This is an educational outreach to spark some discussion about the national deposit cap."
And lawmakers are not dismissing the issue out of hand.
"This cap was instituted to enhance safety and soundness in the banking industry and to ensure competition - and both of those remain important goals," said Rep. Carolyn Maloney, a member of the House Financial Services Committee and the chairman of its financial institutions subcommittee.
"Many things have changed since the cap number was set at 10%," said the New York Democrat, "and at this point it may be worth examining whether that number should be changed."
A spokesman for Senate Banking Committee Chairman Christopher Dodd said the Connecticut Democrat "intends to study this matter in greater detail to assess the impact on consumers, domestic and international competitiveness, and the safety and soundness of America's banking system."
But most sources give B of A long odds of success.
Edward L. Yingling, the president of the American Bankers Association, was atypically blunt in his assessment. Changing the cap "is not even under minimal consideration in Washington," he said. "In terms of members of Congress or the industry, it's an issue that basically no one is interested in."
Keefe Bruyette's Mr. Gardner agreed. "As a political analyst I don't think the appetite is there for Congress to raise that cap right now," he said.
B of A not only is unlikely to get an assist from its peers but also would have to overcome a less than encouraging stance among the federal regulators willing to discuss the issue.
In an interview last week Sheila Bair, the Federal Deposit Insurance Corp.'s chairman, said its position has not been fleshed out but that a company with more than 10% of the country's deposits might have to pay higher premiums to the insurance fund.
"The cap is there to protect the deposit insurance fund," she said. "Given the enhanced exposure, should that be factored into risk-based pricing as well? … If Congress really wanted to consider any single institution going above that cap, at least for those institutions, that is something we would need to look at."
Ms. Bair said the idea has no momentum. "This issue needs a lot more vetting and discussion before it would be ripe for serious consideration," she added.
Office of Thrift Supervision Director John Reich opposes softening the cap.
"I support maintaining the cap for the same reason that it was established in the first place: to prevent large institutions from dominating the market," he said. "I like to consider myself a free market person, but … I side with maintaining as many community banks around the country as possible."
Comptroller of the Currency John Dugan declined to comment for this story.
B of A faces heated opposition from midsize and community banks and their supporters.
Camden Fine, the president of the Independent Community Bankers of America, called B of A's arguments "absurd."
"This isn't about growth; this is about removing competitors from the field - it's perfectly legal for them to grow organically - this is about acquisition and consolidation," he said. "They are not only competing, they are dominating the world."
Diane Casey-Landry, the president of America's Community Bankers, said she would be surprised if the issue gained traction on Capitol Hill when banks are competing so intensely for deposits.
"This one bank wants to gather up more than 10% of the deposits in the country," she said. "When you have 8,300 banks and thrifts, that's a pretty significant concentration."
L. William Seidman, the FDIC's chairman from 1985 to 1991, noted, "This country has a long history of not wanting to see too much financial power in one place.
"Generally, I don't think the Democrats are likely to want to see big banks get bigger."
That is not to say B of A lacks supporters - or that circumstances will not eventually change.
Former Comptroller of the Currency John D. Hawke Jr. said the cap should be eliminated. "In my mind a national deposit cap doesn't make any sense at all," he said. "It has no economic foundation. It's purely political."
Clusters of cities or counties can be considered a market and are protected from over-consolidation by antitrust laws and Federal Reserve Board regulations, he said, but "the country as a whole is not an economic market as such."
An aggressive move into the United States by a foreign bank, or a financial crisis, could bolster B of A's case on Capitol Hill.
Many observers said B of A's best argument is that the cap threatens U.S. banks' ability to compete with foreign rivals.
In its memo, B of A said the deposit cap hurts U.S. banks in three main ways:
"It can prevent U.S. banks from acquiring foreign banks overseas; it can limit potential merger partners of a U.S. bank to foreign banks; and, in time, it can create such size disparities between the largest foreign banks and U.S. banks that our largest banks would be at risk of foreign acquisition."
A veteran financial services consultant who requested anonymity because of his ties to interests on both sides of the issue said lifting the cap is "inevitable" because it forces banks to grow in unnatural and inefficient ways.
"There is no doubt that this is going to happen," he said. "It is a question of when."
