In a deal with Connecticut's attorney general, who was threatening antitrust action against the planned merger with Shawmut National Corp., Fleet Financial Group announced plans Monday provide $208 million for community reinvestment programs in the state.

The deal, believed to be the first of its kind, requires Fleet to invest new money over the next three years in small-business, home-mortgage, and job-retention programs.

"Connecticut is leading the country in using a banking mega-merger to help grow housing, jobs and business at the grass-roots level," said the state's attorney general, Richard Blumenthal.

Massachusetts Attorney General Scott Harshbarger is negotiating a similar reinvestment package with Fleet; details of that program are not known.

Banking attorneys said activist attorneys general, like these two, could spell trouble for other megamergers that are not as far along in the approval process.

State attorneys general, who are seeing their home-grown banks gobbled up by faraway competitors, appear to be increasingly demanding pledges of financial help for community development from the acquiring banks.

Mr. Blumenthal, a second-term Democrat, said he's just doing his job.

"I enforce the antitrust laws of the state, and that provides a very broad authority and responsibility to protect the consumer, not only from the immediate effect of diminished competition, but also from longer-range impacts that might impede economic growth and employment," Mr. Blumenthal said.

The fact that both banks hold either "satisfactory" or "outstanding" Community Reinvestment Act grades is irrelevant, he said.

"They are good partners now," he said. "But our point is that their role in the future ought to be greater than the sum of their parts, because they will be reaching a different magnitude of economic growth and potential."

Mr. Harshbarger has been just as demanding. "We have both the authority and the duty to challenge bank mergers on a broad basis," said George K. Weber, chief of consumer protection and antitrust at the Massachusetts attorney general's office.

The Federal Reserve recently held three hearings on the Fleet-Shawmut deal, in part to give the state officials a chance to air their demands.

Several banking lawyers said antitrust laws deal with competition - not community reinvestment.

"I think there is a very serious question of the legal propriety of all that," said H. Rodgin Cohen, a partner at Sullivan & Cromwell. "Antitrust has certain objectives, and it does not include lending into low- and moderate-income neighborhoods. It is really a perversion of antitrust."

"The antitrust laws are designed to be very narrow," agreed Steve Sunshine, who ran the Justice Department's bank-merger unit until this spring. "They are not intended to let a prosecutor make broad social policies."

Still, Mr. Sunshine, a partner at Shearman & Sterling in Washington, said that state attorneys general probably do have the legal standing to demand a place at the bargaining table. The courts have recognized that the federal antitrust laws do not supersede similar state ones.

Mr. Cohen, however, said he believes state antitrust laws are ripe for a court challenge. Federal antitrust review of bank mergers is so encompassing - including separate evaluations by the Justice Department and the Fed - that there really isn't a role for state antitrust laws, he added.

But he said no bank is likely to take on a state attorney general - the public relations damage would be too great.

The Massachusetts consumer-protection chief, Mr. Weber, seemed unimpressed.

"The argument that federal law preempts state law is wishful thinking concocted by lawyers who represent megabanks," Mr. Weber said. "It would not stand up to the scrutiny of the courts."

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