D.C. Speaks: NY Home Loan Chief Would Welcome Fleet

WASHINGTON — Alfred A. DelliBovi, the president of the Federal Home Loan Bank of New York, is welcoming FleetBoston Financial Corp. with open arms. He supports its recent application to join the New York bank after having bought its seventh-largest shareholder, Summit Bank.

That puts Mr. DelliBovi at odds with the presidents of several other Home Loan banks, who have said that granting Fleet’s application or letting Washington Mutual belong to both the Dallas and San Francisco banks would give conglomerates undue influence over the system and pose excessive risk.

“The reality of financial services today is that consolidation is taking place,” Mr. DelliBovi said. The Gramm-Leach-Bliley Act “is facilitating that consolidation and, if anything, speeding it up.

“This is an issue that can’t be avoided. It’s a major issue for the system that now needs to be dealt with.”

It is not the first time that Mr. DelliBovi has crossed swords with his counterparts. The New York bank is one of two that has not joined the Council of Federal Home Loan Banks, a trade group that seeks to present a united front on public policy matters. (The other, the Chicago bank, sides with him on the issue of multiple memberships.)

Yet Mr. DelliBovi argued that it is outdated to expect large banking companies to confine themselves to the regional boundaries of the 12 Home Loan banks. He said that banks such as his could lose major members if current rules, which bar memberships in multiple districts, are not adjusted.

“Consolidation is having an impact on the system,” Mr. DelliBovi said.

He said that the New York bank is expected to approve Fleet’s application in May, and he urged the Federal Housing Finance Board to clear the Fleet and Washington Mutual applications soon.

Mr. DelliBovi said he took the Finance Board’s plans to draft a proposal on multiple memberships as a good sign. “The fact that they are doing a rulemaking suggests that they believe very strongly that they have the power to do this.”

To join a Home Loan bank, an applicant must be approved by that bank as well by the Finance Board.

Washington Mutual, based in Stockton, Calif., applied to join the Dallas bank last December because it was in the process of buying Houston’s Bank United. But Wamu also sought to keep its membership in the San Francisco bank.

The Dallas bank approved Washington Mutual’s application, and the Finance Board is now considering it. Opponents of the application said dual membership could give Wamu an unfair advantage and allow it to manipulate the system to get better loan and dividend rates.

Banks applying for multiple memberships have a major stake in that system. According to the Finance Board’s figures from the end of 1999, the most recent available, Wamu owned 42.4% of the San Francisco Home Loan Bank and was its largest shareholder. Bank United owned the largest single chunk of the Dallas bank — 18.6%.

FleetBoston’s application in New York has been in the works since merger talks with Summit began. That merger was completed March 1; the combined company has assets of more than $200 billion and is the seventh-largest bank holding company in the country. Fleet is the largest shareholder of the Boston bank, at 12.4%, according to the Finance Board’s figures.

Summit owns 4.29% of the New York bank, a spokesman for Mr. DelliBovi said.At the top of Mr. DelliBovi’s agenda — as well as of his 11 colleagues in the system — is revamping his bank’s capital structure with Gramm-Leach-Bliley. A rule took effect March 1 that establishes risk-based and leverage capital requirements for the Home Loan banks, defines the different classes of stock a bank may issue, and requires each bank to submit capital plans to the Finance Board for approval.

Multiple membership is a close second, though, because uncertainty about who is eligible to join the Home Loan bank makes it is more difficult to set capital requirements, according to Mr. DelliBovi. Knowing which banks are going to be members “is an important part of that process,” he said.

“For the Dallas bank to lose a major customer … is going to affect their plan,” he added.

The matter must be dealt with because there is no end in sight to industry consolidation, even for the two banks that have already filed to join multiple Home Loan banks, Mr. DelliBovi said.

Fleet and Wamu could continue to expand and could eventually want to be members of three Home Loan banks, he said. (“I certainly do not believe that the Bank United or the Summit transaction are the last acquisitions of Wamu and Fleet.”) And he predicted that other banks will follow suit.

“I wouldn’t be a bit surprised if around the country there are others contemplating it.”


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