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Washington, DC - The U.S. House of Representatives today overwhelmingly passed H.R. 698, the Industrial Bank Holding Company Act of 2007, by a vote of 371 to 16. 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 supervisory authorities of the FDIC as a holding company regulator.
“I was pleased to see the House pass the ILC reform bill today with such strong bipartisan support. Chairman Frank and I have been fighting to close the ILC loophole for many years and the House vote today is a significant milestone. This bill has been trumpeted by both Republicans and Democrats alike because we all recognize the need to maintain the historic separation between banking and commerce. As our legislation continues through the legislative process, I will continue to advocate for the strongest possible restrictions on the ILC charter going forward. I look forward to getting a bill to the President before the end of the FDIC-imposed moratorium,” said Congressman Paul Gillmor.
“This bill will preserve the distinction between banking and commerce that is necessary to protect the integrity of our banking system,” said Rep. Barney Frank, Chairman of the House Committee on Financial Services. “I hope to work with the Senate to forge a compromise bill that the President can sign
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 and was overwhelmingly passed by the Financial Services Committee on May 2, 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 enhances regulation of Industrial Loan Companies.”
“H.R. 698 is a good bill. Commercial businesses should not be in banking, just like banks should not be in commercial businesses. But I hope the bill will be fine-tuned in conference to protect reasonable investment decisions made recently by those who had no reason to expect their ILC application might be blocked,” said Rep. Jim Marshall.
Additionally, H.R. 698 contains provisions offered in committee 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 ILCs already owned by commercial firms, the bill would restrict expanded business plans and branching across state lines.
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