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Washington, DC - The House Financial Services Committee today overwhelmingly passed H.R. 698, the Industrial Bank Holding Company Act of 2007. This legislation, co-sponsored by Congressmen Paul Gillmor (R-OH), the Ranking Member of the Financial Institutions Subcommittee, and House Financial Services Committee Chairman Barney Frank (D-MA), along with Congressman Jim Marshall (D-GA), will restore the historic separation between banking and commerce, prevent branch banking by some commercially-owned ILCs, and bolster the examination and enforcement authorities of the FDIC as a holding company regulator.
“I am pleased to see the ILC bill pass the Financial Services Committee by such a wide margin. The principle behind this debate is simple; we must maintain the historic separation between banking and commerce. As the ILC exception grows in popularity, it is creating a parallel banking system which will continue to be exploited should Congress fail to act. The Committee’s vote demonstrates that Congress does not support the continued expansion of this loophole and I look forward to getting a bill to the President before the end of the FDIC-imposed moratorium,” said Congressman Gillmor.
“This ILC bill continues our historic separation between banking and commerce. No doubt it can be fine tuned to protect the reasonable investment decisions made recently by those who had no reason to expect their ILC application might be blocked. But mixing banking and commerce has caused severe problems in our past. We should be proactive on this subject. Being merely reactive assures unnecessary future crises,” said Congressman Jim Marshall.
Congressman Gillmor and Financial Services Committee Chairman Barney Frank introduced H.R. 698 on January 29, 2007 to help restore the wall between banking and commerce and stem the expansion of the ILC charter. The bill is an outgrowth of the Gillmor/Frank compromise which passed the House in both the 108th and 109th Congresses. This legislation was the subject of a hearing on April 25, 2007.
“Let me commend Chairman Frank and Rep. Paul Gillmor for their work on this important issue, and for crafting legislation that commanded broad bipartisan support in the Committee,” stated Ranking Member Spencer Bachus (R-AL). “As the bill moves through the legislative process, I look forward to working with Chairman Frank and Rep. Gillmor to achieve a final legislative product that improves an appropriate regulation of Industrial Loan Companies.”
“Keeping the line between banking and commerce is an important part of our financial system, and today’s bipartisan work on ILC reforms will ensure that we maintain this important separation,” said Chairman Frank. “I thank Rep. Gillmor, Rep. Marshall, and Rep. Baucus for their work on this bill, and look forward to working with my colleagues to bringing this bill to the full House for a vote.”
Additionally, the Financial Services Committee unanimously voted to adopt the manager’s amendment offered by Reps. Frank and Gillmor that incorporated consensus amendments from the FDIC, Federal Reserve, OTS and SEC that generally provide the FDIC with the necessary regulatory tools to effectively supervise industrial bank holding companies.
Some of the major provisions in the Industrial Bank Holding Company Act of 2007 include the following:
- Maintain the necessary historic separation between banking and commerce, most recently re-affirmed in Gramm-Leach-Bliley, by prohibiting new commercially-owned ILCs effective January 29, 2007. This provision would prohibit Wal-Mart, Home Depot and several other commercial firms from chartering or acquiring an industrial bank.
- Address the concerns of the Government Accountability Office (GAO), which in September of 2005 advised Congress to consider bolstering the authorities of the FDIC at the consolidated holding company level.
- For some commercially-owned ILCs, the bill would restrict expanded business plans and branching across state lines.
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