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US Senator Bennett, Rep. Frank Meet Next Week On Bank Charters January 12, 2007

Posted by notapundit in Congress, Politics, US News.
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WASHINGTON (Dow Jones)–The two key lawmakers entrenched in the controversial attempt by Wal-Mart Stores Inc. (WMT) and Home Depot Corp. (HD) to acquire banking charters plan to meet next week, both sides said Friday.

House Financial Services Committee Chairman Barney Frank, D-Mass., and Sen. Bob Bennett, R-Utah, will meet to exchange views, but neither appear to have softened their opposing positions.

There are close to 60 industrial banks, or industrial loan companies, in the U.S. controlling more than $155 billion of assets. Although many of these charters are controlled by financial companies, others are owned by commercial parent companies such as Target Corp. (TGT) and Harley Davidson (HOG).

These charters are the only way a commercial parent company can own a bank, and many of these charters are headquartered in Utah, Bennett’s home state.

Frank opposes allowing non-financial companies to control banks, a move which he says creates a dangerous mixture of banking and commerce. He helped pass legislation last year that would prohibit companies such as Wal-Mart and Home Depot from owning these charters.

Bennett has argued that these charters have operated safely and offer consumers more banking choices. He has successfully kept the issue off the Senate floor.

“The senator has not changed his position on ILCs,” his spokeswoman said Friday.

The industrial bank charter had become so popular that the Federal Deposit Insurance Corp. had a record 14 applications pending last year. In July, the agency announced it was placing a moratorium on accepting any new applications while it studied the unique risks and public policy questions associated with them. The moratorium ends Jan. 31.

Frank and Rep. Paul Gillmor, R-Ohio, have asked the FDIC to extend the moratorium, but the agency so far has been noncommittal.

Frank said Friday that if the FDIC decided to continue offering deposit insurance for commercially owned ILCs, he could immediately introduce legislation that would ban such arrangements.

He said that even if the bill did not pass until after the FDIC had formally approved specific charters, the approvals could be reversed because his legislation would be retroactive to the day it was introduced.

“Generally, investors aren’t interested in pumping a lot of money into something that has the potential for damage,” he said.

By Damian Paletta, Dow Jones Newswires

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