NEW YORK -- When 44 out of 51 city council members sponsored a bill to beef up security at ATMs, bankers here should have down that they were in for a tough fight.

But what followed, in the words of Councilman Walter McCaffrey, was "a textbook example of how not to deal with a legislative body."

Because of a series of missteps and miscalculations, New York bankers now have to deal with the most rigid -- and costly-requirements for ATMs in the nation.

Indeed, their effort to craft a compromise backfired so badly that the resulting law ended up being even stricter than the original proposal.

The banks "botched this thing in every way they possibly could have, politically speaking," says Jerry Skurnik, president of Skurnik & Associates, a New York-based political consulting firm.

"They stepped on some feet early on in the process, and by the time they decided to move in with a lobbying effort, the damage was beyond repair."

With copycat bills brewing in California and New Jersey, the turn of events in New York provides an important case study for other bankers.

"Banks in other states are saying, 'What do I have to do to avoid having that happen here?' -- and the New York case gives them something tangible to refer to," says Sean Kennedy, president of the electronic Funds Transfer Association in Reston, Va.

Some Say Deck Was Stacked

In retrospect, New York bankers think the deck was stacked against them. With such widespread support for the bill in the council, they contend privately, any lobbying effort was destined to fail.

But some politicians and consultants believe that the bankers played a good hand poorly. Indeed, to many influential observers, including the editorial boards of The New York Times and the Daily News, the banks' arguments against many of the proposed ATM security measures were reason enough to oppose the measure.

The bill, which wa approved two weeks ago and is expected to be signed into law shortly, requires every ATM site within New York City to be equipped with full-motion video cameras, improved door-locking mechanisms, convex mirrors, and other features designed to discourage crimes against ATM customers.

The bill required safety features that will cost New York banks an estimated $50 million to install and $61 million per year to maintain and operate.

Questions About Equipment

Bankers agreed to some of the safety measures -- such as minimum lighting requirements -- but they disputed the need for full-motion video cameras and sophisticated door-locking mechanisms. Such equipment is expensive and, the banks argued, not proven to deter crime.

But while the banks were able to sway some important opinion-makers, they appeared to make several tactical mistakes with the council:

* They underestimated the emotions stirred up by two highly publicized ATM shootings and the robbery of a councilwoman.

"I've been around city politics for a lot years, and you very rarely see the kind of emotion and volatility that was brought to the table in this case," said Howard Rubenstein, president of the New York-based political lobbying firm retained by the New York State Bankers Association.

* They neglected to appoint a point man for the discussions until after a crucial committee vote. Through hearings in April, the banks' position was coming from five different voices: Chase Manhattan Bank Corp., Chemical Banking Corp., Citicorp, the New York State Bankers Association, and the NYCE ATM network.

The experience of several municipalities, most notably Chicago, which batted down an ATM security bill, should have demonstrated clearly that a singly negotiator works best in such legislative processes.

* The heads of retail banking operations never got involved in the legislative process. Though the legal and technical representatives sent to the hearings were thorough in their research and presentation of the banks' concerns, the absence of higher-ranking officials irked council members.

* The lobbying effort came too late. By the time it started, the bill had already gone through the initial stages of passage. "I never hear a word from the banks until the bill was voted out of committee, and by that time the genie was out of the bottle," said John D. Sabini, a council member from Queens.

Opportunity Squandered

That some ATM security bill would emerge became clear in January, when 44 council members got behind the idea. But had it not been for the many missteps, the bankers may have been able to help shape the legislation.

The adversarial relationship seemed to be cemented in April, when the Public Safety Committee was holding hearings.

During a question-and-answer period, the bankers -- representing Chase Manhattan Corp., Chemical Banking Corp., and Citicorp -- suggested that the city council might be overstepping its power by trying to establish legislation that applies to federally insured financial institutions.

The Bank Protection Act of 1968, they said, would preempt the city council from enacting any new legislation.

"Are you threatening to sue along those lines?" Mr. McCaffrey, the driving force behind the bill, asked the bankers.

When the bankers' reluctantly answered yes, it became clear that the council considered the threat a slap in the face, a show of disrespect.

It would be several months before the council gathered to put the measure to a vote. And while the council publicly maintains that it used that time to make some concessions to the banks, most observers agree that the bill that was passed is more stringent than the bill that was submitted to bankers in April.

By way of illustration, the most onerous part of the April version of the bill was the requirement that banks install full-motion video cameras at every ATM site.

A few months later, the bill had some minor deletions and one major addition: the requirement that all ATM doors be regulated by a card-reading device that allows entry only to bearers of ATM cards and credit cards.

Bankers have stated that the door lock requirement is by far the most difficult ad expensive of the bill's mandated measures. The expense is further aggravated by a provision stating that security guards must be present at all ATMs without these special locks.

Bankers believe there is still a chance that some of the bill's harsher requirements can be changed before the law takes effect sometime in February.

Specifically, they are hoping that the door lock requirement will be amended.

The city council has set up a task force to look into the feasibility of the new door-locking requirement, and bankers believe this will improve the lines of communication between the two parties.

"This is far from a issue that is settled," said Michael P. Smith, an executive vice president at the New York State Bankers Association.

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