Banking Law

Remember the bill proposed by a Maryland legislator that we discussed last month that would give state-chartered Maryland banks a 10% edge in bidding for contracts from the state government? At least one Maryland bank trade association and some individual community bankers are telling the state legislature, "Thanks, but no thanks."

The group representing Maryland banks is fighting a bill introduced by a Montgomery County lawmaker that would give some of its members an edge in bidding on state and municipal banking contracts.

Instead, the Maryland Bankers Association says it would rather see the process for applying for state and municipal banking business streamlined to make it easier for all Maryland banks, not just those chartered by Maryland?s Commissioner of Financial Regulation, to compete for such work.

?Our members do not want this bill,? said Kathleen Murphy, the bankers group?s CEO. ?We want a competitive, fair environment.?

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Maryland Bankers Association, whose membership includes community banks, and national and regional banks, opposes Frick?s bill, saying it?s unfair to give one group of banks a preference over others. While the 46 state-chartered banks would get a leg up in bidding for contracts under Frick?s bill, the other 91 FDIC-insured banks doing business in Maryland wouldn?t get the same advantage. That includes savings and loan associations headquartered in Maryland and out-of-state banks with a substantial presence here.

?This is not a big bank, small bank issue,? the Maryland Bankers Association said in written testimony submitted in opposition to the bill. ?This bill gives an advantage to 46 state-chartered banks to the detriment of 91 other banks that are serving individuals, businesses and governments throughout Maryland.?

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Mary Ann Scully, CEO of Howard Bank, opposes the bill. Scully, who called it ?well-intended,? said that even though Howard Bank is state-chartered, it doesn?t have the statewide branch network required to compete for the state?s primary banking business.

Instead, Scully said, she would prefer to see the rules changed so community banks such as Howard could bid on pieces of the state?s banking contract in areas where they have branches.

A "competitive, fair environment"? Why, that's so 19th Century!

The response from bankers to this attempt at demagoguery by state lawmakers is further evidence that politicians to what they think are base populist instincts don't have a clue as to what really turns on the constituents to whom they seek suck up. Instead, they enact laws that ensure that the only law that's followed to the letter is the law of unintended consequences. Community banks don't want an unfair advantage to grunt and scarf at the public through. Instead, they just want a fair opportunity to compete.

Of course, when talking to a politician about a desire to promote fundamental fairness, you might as well be talking to a Wall Street banker about the concept of social justice. It's completely outside their frame of reference.