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The Chase's new energy has paid off well: its savings accounts will hit $1 billion this year, v. $22 million 15 years ago; personal loans totaled $166 million last year, v. a paltry $9.8 million in 1947; net profits have climbed 211%, to $70.5 million last year. Yet, like almost all big city banks, the Chase is fighting a stubborn profit squeeze. Reason: rising costs and stiffening competition. The competition comes not only from other savings institutions but from a new generation of corporation treasurers who, instead of putting their idle cash into banks, earn more interest on it by buying commercial paper and U.S. Treasury bills. Says Rockefeller: "We in the city banks need a broader base in retail banking."
Locked Doors. One way to achieve this would be to let city banks spread out, through branching and mergers. In California, where banks are free to branch all over the state, the Bank of America has spread an umbrella of more than 700 branches, built its asset base up to $12.7 billion to make itself the largest bank in the nation (though it makes fewer loans to business than the Chase). But in New York, state laws long kept the big metropolitan banks cooped up within the five boroughs of New York City, forcing them to look on helplessly as their old customers moved in droves to the suburbs. The result is that an ever-increasing share of New Yorkers' savings has gone into suburban banks. One of the fastest growing banks in the U.S. today is Long Island's
Meadow Brook National Bank, which in only ten years has boosted its deposits 14-fold to $605 million and has now audaciously set up branches in Manhattan itself.
The New York State legislature, at the urging of Governor Nelson Rockefeller, finally relented two years ago, grudgingly passed a bill that gives the city's banks the right to expand into the adjoining suburban counties of Westchester and Nassau. But, complains President R. E.
McNeill of Manufacturers Hanover Trust: "The law has so many limitations, it's like telling a boy he can run out to play, then locking the door before he gets through it." When the Chase and First National City tried to make up for lost suburban business in a hurry by merging with established banks in Westchester and Nassau, they ran afoul of the Federal Reserve Board and Controller of Currency James Saxon, who declared that if city banks want to go into the suburbs, they should do so by the tedious, costly route of building new branches of their own.
Merger Muddle. Even in cases where Saxon and the Fed have approved bank consolidations, eager Justice Department trustbusters—though the law gives them no clear authority to prevent bank mergers—have tried to stop them. Justice has filed test cases against the proposed marriage of Continental Illinois National Bank and the City National Bank in Chicago, against the merger of the Philadelphia National Bank and the Girard Trust, and against that of the First National Bank and Security Trust Co. of Lexington, Ky.