Fed Approves Chase-Chemical Merger

WASHINGTON —  The Federal Reserve Board on Friday approved the largest banking merger in U.S. history, the $10-billion marriage of Chemical Banking Corp. and Chase Manhattan Corp.

The move, by a 6-0 vote, means Chase and Chemical need only the New York State Banking Department’s approval to complete the acquisition.

“We expect that shortly,” Chemical spokesman John Stefans said.

Swift approval by New York regulators could allow Chase and Chemical to complete the acquisition before March 31, the bank’s goal. Bank executives have said they would be ready to close earlier if they receive all necessary approvals.

Regulators in Delaware, where the banks are incorporated, approved the merger Friday, and the Justice Department cleared the acquisition last month, finding no antitrust obstacles. Both banks’ shareholders have approved the deal.

The merger of Chemical and Chase would create an enormous bank with $297 billion in assets, 2,000 offices and a leading position in consumer banking, mortgages, credit cards, corporate lending and other global services. The combination would also result in the elimination of 12,000 jobs and the closure of 100 branches.

But there could be a legal snag to the merger. New York-based housing activist Matthew Lee of Inner City Press-Community on the Move said his group plans to ask a federal court to block the merger because of Chase’s lending record to small businesses and low-income neighborhoods.

Chase and Chemical have faced criticism from some community groups that say the institutions discriminate against minority borrowers and that the deal would lead to poorer service. Both banks defended their records as sound.

At a hearing in New York in November, many activists and lawmakers expressed concern that the merger would lead to higher fees, fewer choices for consumers and diminished service for low-income customers. But the opposition wasn’t unanimous: Others spoke out in favor, saying the banks’ special programs provide loans to people who wouldn’t otherwise qualify.

Bank officials have announced a five-year, $18.1-billion loan and grant pledge under which the combined institution would lend $4.2 billion in New York and boost the number of loans to small businesses by 60%.

The banks said they would close only seven branches in low- and moderate-income neighborhoods.

Chemical and Chase both have good fair-lending records. But several community groups have challenged the merger under the Community Reinvestment Act, a federal law that requires banks to lend in areas in which they gather deposits.