This was the attitude of hundreds of would-be customers at
Maspeth Federal Savings bank branches throughout Queens this week. As rumors spread that
the mutual company was going public, speculators traveled to Queens from all five boroughs
hoping to cash in on what they believed to be an inside stock tip.
is insane, waiting on line for playoff tickets is one thing, but bank accounts?
A Rego Park customer
Anyone who holds an account when the company announces it is going public, the rumor
went, would be entitled to stock options proportional to their account balance.
Unprepared for the influx, the lines at these bank branches soon extended out the door.
"This is insane," said one customer at the Rego Park branch, who fortunately
only had to use the ATM. "Waiting on line for playoff tickets is one thing, but bank
accounts? Thats ridiculous."
The fact that a spokesperson for Maspeth Federal denied that the bank is going public,
was not enough to dissuade the speculators, because even if the rumor is true, not even
the tellers would be permitted to say.
Then a Hasidic Jewish community from Brooklyn got wind of the rumor, and the lines
became so long that the bank began turning their pre-existing customers away.
Speculators hurried to open accounts at packed branches of
Maspeth Federal Savings Banks, spilling in-line onto the street.
"They said they are telling all of their regular customers to come back Friday
after sundown or on Saturday," said one longtime customer who was frustrated by
several unsuccessful attempts to do her banking. "Thats the Sabbath, they
said." Religious Jews limit their activity on Friday evenings and Saturdays.
Unable to cope with the additional volume, on March 31 the bank put a freeze on all new
"During the past several weeks Maspeth Federal Savings has experienced a dramatic
increase in new accounts," said Maspeth chairman Franklin Frontera in an official
statement. "This activity has apparently been fueled by an unfounded rumor that our
association is converting to stock ownership. Nevertheless, the efficient operation of the
bank has made it necessary to restrict deposit growth at the present time and it is for
this reason that the Board of Directors has decided not to accept new accounts until
Soon after, business was back to normal at Maspeth Federal. But for the hundreds of
speculators that were able to open the accounts, a game of wait-and-see began.
Occurrences similar to that of Maspeth Federals are not uncommon, according to
Bill Fullwiter, a spokesperson for the Federal Office of Thrift Supervision, the agency
that regulates bank conversions.
"Given the recent track record of banks, and the strength of the market and mutual
companies, it is not surprising that people would be interested in trying to capitalize on
a tip," he said.
Fullwiter added that the timing of the account rush is also not surprising, since March
31 is generally very often the cut-off date for banks which do announce they are going
When a bank applies to convert to a public company," Fullwiter said, "the
customers must have been an account holder for at least one year prior to the application
to receive stock."
This would mean that should Maspeth announce that it is going public this year, the
participants of the account rush would come up empty handed. However, if they announce
their conversion next year, everyone that opened an account before the March 31, 1998
deadline would be eligible.
A group of Hasidic Jews on their way to open new accounts at the
main branch of Maspeth Federal.
Photos By Manny Patino
Before a bank can successfully convert from a mutual association to stock ownership,
they must apply to both the Office of Thrift Supervision and the Securities and Exchange
"There are many rules when it comes to gun jumping situations," said Duncan
King, a spokesperson for the SEC. "But there needs to be some sort of smoking
In keeping with SEC policy, King said that he would "neither confirm nor
deny" whether or not the SEC was looking into the situation at Maspeth Federal.
Assuming everything goes well, it generally takes four to six weeks for a mutual
conversion to be approved by the two agencies.
When this does occur, there is often so much interest in the bank that it there are not
enough shares to go around. "In a hot conversion, one that seems to have considerable
value," Fullwiter said, "the stock is usually oversubscribed, meaning that all
of the account holders buy it out."
In the past decade, several Queens banks have gone public, including Queens County
Savings and Astoria Federal. It has proven to be a way for banks to stay lucrative and
Speculators are already looking into the possibility of several other Queens banks
joining the ranks of publicly traded companies.
Only time will tell if Maspeth Federal is one of them.