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ICBA Urges FDIC to Deny Home Depot Bank Request

Calls for Extension of Comment Period and Public Hearings

Washington, D.C. (June 6, 2006)—The Independent Community Bankers of America (ICBA) asked the Federal Deposit Insurance Corporation (FDIC) to deny an application by Home Depot to acquire EnerBank USA, an industrial loan corporation (ILC) in Salt Lake City. ICBA also urged the FDIC to extend the period for public comment and to hold public hearings on Home Depot's application to allow the full extent of public opinion to be heard.

"The application presents many issues similar to those presented by Wal-Mart's deposit insurance application for a Utah industrial bank, as well as issues unique to Home Depot's application and business plan for EnerBank," Terry J. Jorde, ICBA chairman and president and CEO of CountryBank USA, Cando, N.D. said in ICBA's letter to the FDIC. "There is no clear public policy reason or social benefit to be served by permitting Home Depot to acquire control of EnerBank at this time."

ICBA opposes Home Depot's application because permitting Home Depot to enter banking raises a number of serious concerns, including the threat to the long-standing public policy separating banking and commerce, unnecessary risks to the Deposit Insurance Fund and the U.S. banking system, inflicting lasting damage on local communities when their community banks disappear and limiting consumers' credit choices.

ICBA also pointed out that Home Depot's application in particular is likely to blur the line between lending and commerce. "It seems likely that Home Depot will use its contractors to market EnerBank's loan services to home improvement customers employing the contractors' services," ICBA wrote. "This relationship is sure to cause confusion for the loan applicants, and raise questions regarding customer protections under the Truth in Lending Act and other required consumer disclosure laws."

Moreover, the Home Depot-EnerBank arrangement, as structured, rests on illegal arrangements under Section 23A of the Federal Reserve Act and Federal Reserve Board Regulation W - which place quantitative limits on transactions between a bank and its affiliates. The relationship is even more troubling when the consumer is a Home Depot customer, the contractor is referred to the customer by Home Depot, and EnerBank knows at the outset that the loan will be used to pay the contractor and to purchase goods from Home Depot.

ICBA has been leading the way in efforts to maintain the separation of banking and commerce and is working with Congress to close the ILC loophole in the Bank Company Holding Act.

Find the comment letter at www.icba.org.