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US Reps Frank, Gillmor, Sen. Bennett Meet On ILC Issue January 18, 2007

Posted by notapundit in Congress, Politics, US News.
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WASHINGTON (Dow Jones)–Three key lawmakers entrenched over whether commercial firms such as Wal-Mart Stores Inc. (WMT) and Home Depot Inc. (HD) should be able to own banking charters met Thursday but showed no signs of easing their positions as a regulatory deadline draws near on the issue.

Reps. Barney Frank, D-Mass., Paul Gillmor, R-Ohio, and Sen. Bob Bennett, R-Utah, met Thursday afternoon for close to half an hour to discuss their different stances on the industrial loan company, or ILC, issue, a public policy question that is currently pending before the Federal Deposit Insurance Corp.

“It was a constructive meeting,” said Frank spokesman Steven Adamske. “They agreed to disagree. The differences will be worked out through the normal legislative processes.”

Frank, who is Chairman of the House Financial Services Committee, and Gillmor have argued that commercial firms shouldn’t be able to own these banking charters because they pose a dangerous mix of banking and commerce. Both co-sponsored a bill last year that would prohibit companies such as Wal-Mart and Home Depot from owning these charters. The bill passed in the House but found no traction in the Senate.

Bennett, the second ranking Republican on the Senate Banking Committee, has argued that commercial firms should be able to own these charters because they offer consumers more options and have operated safely in the past. Most of the 60 existing ILCs are headquartered in Bennett’s home state.

Wal-Mart is seeking a banking charter to process credit cards and other transactions. The company has said it has no interest in opening bank branches. Home Depot is trying to acquire the charter so that it can offer home construction loans. Many ILCs are owned by financial services companies.

Public outcry over the Wal-Mart and Home Depot applications, most of which came from community bankers, led the FDIC to place a six-month moratorium on any applications while it studied the public policy risks and issues associated with industrial banks. Even though ILCs must have state charters, they also need federal deposit insurance.

The FDIC’s moratorium expires Jan. 31, and the board is expected to meet publicly around that date to discuss how to move forward. Frank and Gillmor have asked FDIC Chairman Sheila Bair to extend the moratorium, but she has not yet said what she plans to do.

Gillmor and Frank are expected to introduce a bill that would block the commercial ownership of ILCs later this month. Hearings in the House are expected in the next few months.

Senate Banking Committee Chairman Chris Dodd, D-Conn., told Dow Jones Newswires last week that he had “some apprehension about the lack of regulation” facing ILCs. He said he was interested to see the review conducted by the FDIC.

When asked if he would hold hearings, he said, “We’ll wait and see.”

By Damian Paletta, Dow Jones Newswires

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