Memo to PA Congressional Delegation

On behalf of the almost 200 community banks we represent in Pennsylvania, I am writing to urge you to co-sponsor bipartisan legislation introduced by Rep. Paul Gillmor (R-Ohio) and Rep. Barney Frank (D-Massachusetts) to close the loophole being exploited by Wal-Mart, Home Depot and other huge conglomerates to become Industrial Loan Corporations (ILCs) and therefore breach the separation of banking and commerce that has been a linchpin of our nation’s economic system.

At the present time, there are currently 14 pending ILC applications before the FDIC, including applications from Wal-Mart, Home Depot, DaimlerChrysler, Blue-Cross Blue Shield, and Berkshire Hathaway.

H.R. 5746 would address the explosion of requests by these corporate giants for deposit insurance coverage by:

• Prohibiting commercial firms (those that derive at least 15% of their revenues from commercial activities) from chartering or acquiring an industrial loan corporation (ILC) after June 1, 2006;
• Limiting the activities and prevent branching outside their home states of commercially-owned ILCs chartered or acquired between October 1, 2003, and June 1, 2006; and
• Bolstering the FDIC’s authority to conduct consolidated supervision of ILCs at the holding company level.

Last month, Reps. Gillmor and Frank co-authored a letter to the FDIC urging the FDIC to impose a moratorium on ILC applications until Congress has a chance to act on this matter. We thank the members of the delegation that signed onto this letter or who sent their own to the FDIC supporting the same principle.

H.R. 5746 will send a strong signal to the FDIC that Congress is concerned about the proliferation of commercially-owned ILCs and will provide a vehicle for the Congress to consider this vital matter.

Last week, the House Financial Services Subcommittee, chaired by Rep. Spencer Bachus (R-Alabama), held a hearing on this issue. Clearly, interest is building in Congress to address this growing threat to the safety and health of our economic system.

Without a doubt, if Wal-Mart, Home Depot and these other corporate giants are permitted to enter the banking system, community banking will be severely impacted and the present system of competition and customer choice limited and hampered. Moreover, we know you recognize the value of having community banks throughout Pennsylvania and our nation. In many of our small towns and cities, community banks are an economic engine and focal point of community and economic development. Community bankers pride themselves on giving back to their communities. This same commitment to community clearly does not exist from these corporate conglomerates.

Again, we urge you to co-sponsor H.R. 5746 and support community banking.

If you have any questions, please do not hesitate to contact me or Dave Transue, our Government Affairs Consultant. Thanks so much.

CC: All PACB Members
       ICBA
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