If Mergers Were Simple, Banking's Troubles Might Be Over

For years, executives at First Interstate Bank System of Montana Inc. and Commerce Bancshares Inc. debated the merits of a merger. Linking First Interstate's seven banks with Commerce Bancshares, across the state line in Sheridan, Wyo., would create a bigger, more efficient network. Combining back offices would also cut costs. And working out the merger seemed a cinch. The two privately held banks shared many of the same family stockholders and a few top executives. After clearing state regulators, the banks expected a swift approval when they filed a merger application in September, 1989, with the Federal Reserve Bank in Minneapolis.

The application is still pending. The Federal Reserve has delayed a final decision while it investigates a claim by local activists that Billings-based First Interstate has discriminated against a local Cheyenne Indian reservation. "The reservation has been redlined for years by the bank," alleges Gail M. Small, director of Native Action of Lame Deer, Mont., who wants to make sure the merged bank doesn't continue the policy. First Interstate denies the charge. But the bank has yet to persuade regulators to let the merger go ahead. Says William H. Ruegamer, First Interstate's chief operating officer: "We're amazed this merger has not been approved. It's a routine business transaction, and the issue is irrelevant."