FOR IMMEDIATE RELEASE
ICBA Renews Call for Senate Passage of ILC Bill
Current Financial Market Turmoil Highlights Need to Keep Banking and Commerce Separate
Washington, D.C. (Sept. 4, 2007)—The Independent Community Bankers of America (ICBA) renewed its call for the Senate to quickly pass the ICBA-backed Industrial Bank Holding Company Act (S.1356), a measure that would close the industrial loan company (ILC) loophole in federal banking law allowing commercial firms to own banks and maintain the separation of banking and commerce.
"The troubles experienced by Countrywide clearly demonstrate what can happen when the public loses confidence in the parent owner of a subsidiary bank," said Camden Fine, ICBA president and CEO in a letter to Senate Banking Committee Chairman Christopher Dodd (D-Conn.) and Ranking Member Sen. Richard Shelby (R-Ala.). "Fear is contagious. Imagine the damage to the subsidiary FDIC-insured banks had the very largest commercial firms, such as Wal-Mart, Home Depot or others, owned multi-billion dollar FDIC-insured banks during the current market turmoil. That prospect alone should be impetus enough to spur action on the Industrial Bank Holding Company Act."
Wal-Mart has made three attempts to gain a bank charter, most recently by seeking to exploit the ILC loophole in the Bank Holding Company Act. Although that application has been withdrawn, other large commercial firms, such as Home Depot, are seeking an ILC charter. Left unchecked, commercial ownership of ILCs poses tremendous risk to the U.S. financial system, would reduce competition over time, and would weaken, rather than strengthen, the local economies of many communities across the nation.
"No one knows which sector of the economy might in the future pose difficulties for banks owned by commercial firms," Fine said. "The past reveals a long list of troubled sectors and troubled companies. We should all be grateful that Enron didn't own an ILC. We know these problems will recur. What we don't know is exactly where -- which is why Congress has maintained a strict separation between commercial companies and federally insured banks."
In May, the U.S. House of Representatives passed by an overwhelming majority the pro-consumer, pro-competition ICBA-backed Industrial Bank Holding Company Act of 2007 (H.R. 698) sponsored by House Financial Services Committee Chairman Barney Frank (D-Mass.) and Rep. Paul Gillmor (R-Ohio).
Senators Sherrod Brown (D-Ohio), Tim Johnson (D-S.D.) and Wayne Allard (R-Colo.) introduced a similar measure (S. 1356) in May. Passage of S. 1356 would maintain the integrity and safety and soundness of the nation's financial system, including deposit taking, lending, and payments processing, by prohibiting any additional commercial companies from acquiring ILC charters.
ICBA has been leading the effort to enact legislation that upholds the fundamental principle of the separation of banking and commerce and urges the Senate to do what's right for America's communities by acting quickly to pass S. 1356. Read the letter at www.icba.org.
The Independent Community Bankers of America, the nation’s voice for community banks, represents 5,000 community banks of all sizes and charter types throughout the United States and is dedicated exclusively to representing the interests of the community banking industry and the communities and customers we serve. For more information, visit www.icba.org.