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Interstate Banking: How Colorado Would Benefit

IP-16-87 (December 1987)
Author: Jerome C. Darnell

PDF of full Issue Paper
Scribd version of full Issue Paper

In Brief

Should Colorado permit bank ownership across State lines? When this proposal was defeated in the 1986 legislative session, opponents were relative at avoiding its “devastating impact on communities” and its “danger to the economy from concentration of the money supply in the hands of a few giant mega-banks.”

But proponents warned of “a shift in the regional economic center from Denver to Phoenix or Salt Lake City.” one leading banker worried: “We are already losing the edge.”

Proposed again in the 1987 session, the measure was cheered as necessary to “protect Colorado’s place as a financial hub” but booed by consumer advocates as holding few real benefits. It once more failed to pass. The bill is given a good chance in 1988, however, and CU finance professor Jerome Darnell welcomes it in this issue paper.

Darnell says that a change in Colorado law to permit interstate banking is overdue. Barriers cannot be erected around Colorado to inhibit the free flow of capital and retard innovation in banking practices. The benefits may not be dramatic, but the downside risk appears minimal.

The law probably would facilitate arrangement of larger loan packages among affiliates of holding companies. Banks may be able to use the law change to import some capital from other states to assist our state’s growth.