5290 Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Notices
1 See Fifth Report and Order, 19 FCC Rcd at
15822–23, para. 44. We note that the Commission
currently is considering what particular
requirements, if any, that it should apply in
conducting heightened review of E-Rate program
participants. See Universal Service Fund Oversight
NPRM, 20 FCC Rcd at 11345, para. 91.
1 For purposes of the extended moratorium, the
terms ‘‘industrial loan company’’ and ‘‘industrial
bank’’ mean any insured State bank that is an
industrial bank, industrial loan company, or other
similar institution that is excluded from the
definition of ‘‘bank’’ in the Bank Holding Company
Act of 1956 (BHCA) pursuant to section 2(c)(2)(H)
of the BHCA, 12 U.S.C. 1841(c)(2)(H).
2 For purposes of the extended moratorium, the
term ‘‘financial activity’’ includes: (i) Banking,
managing or controlling banks or savings
associations; and (ii) any activity permissible for
financial holding companies under 12 U.S.C.
1843(k), any specific activity that is listed as
permissible for bank holding companies under 12
U.S.C. 1843(c), as well as activities that the Federal
Reserve Board (FRB) has permitted for bank holding
companies under 12 CFR 225.28 and 225.86, and
any activity permissible for all savings and loan
holding companies under 12 U.S.C. 1467a(c). The
term ‘‘non-financial activity’’ is any other activity.
The FDIC intends to follow the written guidance of
the FRB and the Office of Thrift Supervision (OTS)
regarding permissible holding company activities in
its interpretations of the term ‘‘financial activity’’
and to consult with the FRB and/or OTS before
making any decisions.
Monday, March 5, 2007, from 1 to 5
p.m. (Eastern Time). Additional
information regarding availability of
meeting materials, procedures for
providing public input, and
accessibility are provided in the
December 27, 2006 Federal Register, or
from the DFO at the contact information
provided above.
Dated: January 29, 2007.
Anthony F. Maciorowski,
Deputy Director, EPA Science Advisory Board
Staff Office.
[FR Doc. E7–1791 Filed 2–2–07; 8:45 am]
BILLING CODE 6560 –50–P
FEDERAL COMMUNICATIONS
COMMISSION
[FCC 06–177]
Notice of Debarment
AGENCY: Federal Communications
Commission.
ACTION: Notice.
SUMMARY: The Enforcement Bureau
(Bureau) debars Premio, Inc. (Premio)
from all activities associated with the
schools and libraries universal service
support mechanism, also known as the
E-Rate program. Premio pled guilty to
and was convicted of serious fraud-
related felonies against the E-Rate
program. We find Premio’s conduct
merits a debarment of at least three
years, as contemplated by our
debarment rule, but in light of several
important factors, we will impose a
debarment period of one year.
DATES: Debarment commences on the
Premio, Inc. receives the debarment
letter or whichever date comes first, for
a period of one year.
FOR FURTHER INFORMATION CONTACT:
Diana Lee, Federal Communications
Commission, Enforcement Bureau,
Investigations and Hearings Division,
Room 4–A265, 445 12th Street, SW.,
Washington, DC 20554. Diana Lee may
be contacted by phone at 202–418–1420
or e-mail at diana.lee@fcc.gov.
SUPPLEMENTARY INFORMATION: This a
summary of the Commission’s Notice of
Debarment, released January 22, 2007.
As an additional precaution to protect
the E-Rate program, we put in place two
monitoring measures to ensure Premio’s
compliance upon its re-entry into the E-
Rate program, in the event that Premio
re-enters the E-Rate program during its
three year probation period. First, we
order USAC to review with heightened
scrutiny Premio’s applications
submitted during the first two funding
years after re-entry.1 Second, we order
the Administrator to conduct automatic
annual audits regarding Premio’s
compliance with the Act and the
Commission’s rules governing the E-
Rate program, for each of the first two
funding periods upon Premio’s re-entry.
We find these additional precautionary
measures are necessary to ensure that E-
Rate funds are used only for their
intended purpose and that the program
is not subject to additional waste, fraud,
or abuse. The full text of this Notice is
available for inspection and copying
during normal business hours in the
FCC Reference Center, Room CY–A–
257, 445 12th Street, SW., Washington,
DC 20554. The complete text may also
be purchased from the Commission’s
duplicating contractor, Best Copy and
Printing, Inc. (BCP), Portals II, 445 12th
Street, SW., Room CY–B402,
Washington, DC 20554. The complete
item is also available on the
Commission’s Web site at http://
www.fcc.gov/eb.
Federal Communications Commission.
Hillary S. DeNigro,
Chief, Investigations and Hearings Division,
Enforcement Bureau.
[FR Doc. E7–1795 Filed 2–2–07; 8:45 am]
BILLING CODE 6712 –01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
Moratorium on Certain Industrial Bank
Applications and Notices
AGENCY: Federal Deposit Insurance
Corporation (FDIC)
ACTION: Notice; Limited Extension of
Moratorium.
SUMMARY: This notice announces a one-
year extension of the termination date of
the FDIC’s existing moratorium on
industrial loan companies and
industrial banks 1 (collectively,
‘‘industrial banks’’) for deposit
insurance applications and change in
control notices with respect to certain
industrial banks. The extended
moratorium only applies to applications
for deposit insurance and change in
control notices with respect to
industrial banks that will become
subsidiaries of companies engaged in
non-financial activities 2 (‘‘commercial
activities’’).
Although the FDIC’s existing
industrial bank moratorium was
originally set to expire on January 31,
2007 for all industrial banks, as a result
of the extension, the moratorium will
now expire on January 31, 2008 for
certain industrial banks. The extended
moratorium does not apply to any
application for deposit insurance or
change in control notice with respect to
any industrial bank that will not become
a subsidiary of a company, or any
industrial bank that will become a
subsidiary of a company engaged only
in financial activities. The FDIC is also
publishing elsewhere in the Federal
Register today a notice of proposed
rulemaking that proposes certain
requirements on any industrial bank
that will become a subsidiary of a
company that is engaged only in
financial activities and is not subject to
consolidated bank supervision by the
Federal Reserve Board (FRB) or the
Office of Thrift Supervision (OTS)
(hereinafter referred to as ‘‘Federal
Consolidated Bank Supervision’’).
DATES: The extended moratorium is
effective through January 31, 2008.
FOR FURTHER INFORMATION CONTACT:
Robert C. Fick, Counsel, (202) 898–8962
or Thomas P. Bolt, Counsel, (202) 898–
6750, Federal Deposit Insurance
Corporation, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Industrial banks were first chartered
in the early 1900’s as small loan
companies for industrial workers. Over
time some of the chartering states
expanded the powers of their industrial
banks to the extent that some industrial
banks now have generally the same
powers as state commercial banks.
VerDate Aug<31>2005 15:07 Feb 02, 2007 Jkt 211001 PO 00000 Frm 00033 Fmt 4703 Sfmt 4703 E:\FR\FM\05FEN1.SGM 05FEN1
mstockstill on PROD1PC66 with NOTICES
1 See Fifth Report and Order, 19 FCC Rcd at
15822–23, para. 44. We note that the Commission
currently is considering what particular
requirements, if any, that it should apply in
conducting heightened review of E-Rate program
participants. See Universal Service Fund Oversight
NPRM, 20 FCC Rcd at 11345, para. 91.
1 For purposes of the extended moratorium, the
terms ‘‘industrial loan company’’ and ‘‘industrial
bank’’ mean any insured State bank that is an
industrial bank, industrial loan company, or other
similar institution that is excluded from the
definition of ‘‘bank’’ in the Bank Holding Company
Act of 1956 (BHCA) pursuant to section 2(c)(2)(H)
of the BHCA, 12 U.S.C. 1841(c)(2)(H).
2 For purposes of the extended moratorium, the
term ‘‘financial activity’’ includes: (i) Banking,
managing or controlling banks or savings
associations; and (ii) any activity permissible for
financial holding companies under 12 U.S.C.
1843(k), any specific activity that is listed as
permissible for bank holding companies under 12
U.S.C. 1843(c), as well as activities that the Federal
Reserve Board (FRB) has permitted for bank holding
companies under 12 CFR 225.28 and 225.86, and
any activity permissible for all savings and loan
holding companies under 12 U.S.C. 1467a(c). The
term ‘‘non-financial activity’’ is any other activity.
The FDIC intends to follow the written guidance of
the FRB and the Office of Thrift Supervision (OTS)
regarding permissible holding company activities in
its interpretations of the term ‘‘financial activity’’
and to consult with the FRB and/or OTS before
making any decisions.
Monday, March 5, 2007, from 1 to 5
p.m. (Eastern Time). Additional
information regarding availability of
meeting materials, procedures for
providing public input, and
accessibility are provided in the
December 27, 2006 Federal Register, or
from the DFO at the contact information
provided above.
Dated: January 29, 2007.
Anthony F. Maciorowski,
Deputy Director, EPA Science Advisory Board
Staff Office.
[FR Doc. E7–1791 Filed 2–2–07; 8:45 am]
BILLING CODE 6560 –50–P
FEDERAL COMMUNICATIONS
COMMISSION
[FCC 06–177]
Notice of Debarment
AGENCY: Federal Communications
Commission.
ACTION: Notice.
SUMMARY: The Enforcement Bureau
(Bureau) debars Premio, Inc. (Premio)
from all activities associated with the
schools and libraries universal service
support mechanism, also known as the
E-Rate program. Premio pled guilty to
and was convicted of serious fraud-
related felonies against the E-Rate
program. We find Premio’s conduct
merits a debarment of at least three
years, as contemplated by our
debarment rule, but in light of several
important factors, we will impose a
debarment period of one year.
DATES: Debarment commences on the
Premio, Inc. receives the debarment
letter or whichever date comes first, for
a period of one year.
FOR FURTHER INFORMATION CONTACT:
Diana Lee, Federal Communications
Commission, Enforcement Bureau,
Investigations and Hearings Division,
Room 4–A265, 445 12th Street, SW.,
Washington, DC 20554. Diana Lee may
be contacted by phone at 202–418–1420
or e-mail at diana.lee@fcc.gov.
SUPPLEMENTARY INFORMATION: This a
summary of the Commission’s Notice of
Debarment, released January 22, 2007.
As an additional precaution to protect
the E-Rate program, we put in place two
monitoring measures to ensure Premio’s
compliance upon its re-entry into the E-
Rate program, in the event that Premio
re-enters the E-Rate program during its
three year probation period. First, we
order USAC to review with heightened
scrutiny Premio’s applications
submitted during the first two funding
years after re-entry.1 Second, we order
the Administrator to conduct automatic
annual audits regarding Premio’s
compliance with the Act and the
Commission’s rules governing the E-
Rate program, for each of the first two
funding periods upon Premio’s re-entry.
We find these additional precautionary
measures are necessary to ensure that E-
Rate funds are used only for their
intended purpose and that the program
is not subject to additional waste, fraud,
or abuse. The full text of this Notice is
available for inspection and copying
during normal business hours in the
FCC Reference Center, Room CY–A–
257, 445 12th Street, SW., Washington,
DC 20554. The complete text may also
be purchased from the Commission’s
duplicating contractor, Best Copy and
Printing, Inc. (BCP), Portals II, 445 12th
Street, SW., Room CY–B402,
Washington, DC 20554. The complete
item is also available on the
Commission’s Web site at http://
www.fcc.gov/eb.
Federal Communications Commission.
Hillary S. DeNigro,
Chief, Investigations and Hearings Division,
Enforcement Bureau.
[FR Doc. E7–1795 Filed 2–2–07; 8:45 am]
BILLING CODE 6712 –01–P
FEDERAL DEPOSIT INSURANCE
CORPORATION
Moratorium on Certain Industrial Bank
Applications and Notices
AGENCY: Federal Deposit Insurance
Corporation (FDIC)
ACTION: Notice; Limited Extension of
Moratorium.
SUMMARY: This notice announces a one-
year extension of the termination date of
the FDIC’s existing moratorium on
industrial loan companies and
industrial banks 1 (collectively,
‘‘industrial banks’’) for deposit
insurance applications and change in
control notices with respect to certain
industrial banks. The extended
moratorium only applies to applications
for deposit insurance and change in
control notices with respect to
industrial banks that will become
subsidiaries of companies engaged in
non-financial activities 2 (‘‘commercial
activities’’).
Although the FDIC’s existing
industrial bank moratorium was
originally set to expire on January 31,
2007 for all industrial banks, as a result
of the extension, the moratorium will
now expire on January 31, 2008 for
certain industrial banks. The extended
moratorium does not apply to any
application for deposit insurance or
change in control notice with respect to
any industrial bank that will not become
a subsidiary of a company, or any
industrial bank that will become a
subsidiary of a company engaged only
in financial activities. The FDIC is also
publishing elsewhere in the Federal
Register today a notice of proposed
rulemaking that proposes certain
requirements on any industrial bank
that will become a subsidiary of a
company that is engaged only in
financial activities and is not subject to
consolidated bank supervision by the
Federal Reserve Board (FRB) or the
Office of Thrift Supervision (OTS)
(hereinafter referred to as ‘‘Federal
Consolidated Bank Supervision’’).
DATES: The extended moratorium is
effective through January 31, 2008.
FOR FURTHER INFORMATION CONTACT:
Robert C. Fick, Counsel, (202) 898–8962
or Thomas P. Bolt, Counsel, (202) 898–
6750, Federal Deposit Insurance
Corporation, Washington, DC 20429.
SUPPLEMENTARY INFORMATION:
I. Background
Industrial banks were first chartered
in the early 1900’s as small loan
companies for industrial workers. Over
time some of the chartering states
expanded the powers of their industrial
banks to the extent that some industrial
banks now have generally the same
powers as state commercial banks.
VerDate Aug<31>2005 15:07 Feb 02, 2007 Jkt 211001 PO 00000 Frm 00033 Fmt 4703 Sfmt 4703 E:\FR\FM\05FEN1.SGM 05FEN1
mstockstill on PROD1PC66 with NOTICES
5291Federal Register / Vol. 72, No. 23 / Monday, February 5, 2007 / Notices
3 Public Law 100–86, 101 Stat. 552 (codified as
amended in various sections of title 12 of the U.S.
Code)
4 During 2000, 4 new industrial banks were
insured; 2 during each of 2001 and 2002; 5 during
2003; 6 during 2004; 4 during 2005; and 1 in 2006.
5 Based on reported assets as of September 30,
2006, the most recent reported data.
6 Industrial banks also operate in Colorado,
Hawaii, Indiana, Minnesota and Nevada.
7 U.S. Gov’t Accountability Office, GAO–05–621,
Industrial Loan Corporations: Recent Asset Growth
and Commercial Interest Highlight Differences in
Regulatory Authority 79–80 (2005) (hereinafter
‘‘GAO Report’’).
8 See Federal Deposit Insurance Corporation
Office of Inspector General, Report No. 2004–048,
The Division of Supervision and Consumer
Protection’s Approach for Supervising Limited-
Charter Depository Institutions (2004) (hereinafter
‘‘OIG Report’’).
9 See the FDIC’s Web site at http://www.fdic.gov/
regulations/laws/walmart/.
10 Industrial Loan Companies: A Review of
Charter, Ownership, and Supervision Issues:
Hearing Before the H. Comm. on Financial Services,
109th Cong. (2006). The Committee also heard
testimony from G. Edward Leary, Commissioner for
the Utah Department of Financial Institutions; Rick
Hilman, Director of Financial Markets and
Community Investment, U.S. Government
Accountability Office; George Sutton, Former
Commissioner for the Utah Department of Financial
Institutions; Terry Jorde, Chairman, President, and
CEO of CountryBank USA, Chairman of ICBA; John
L. Douglas, Partner, Alston & Bird; Arthur C.
Johnson, Chairman and CEO of United Bank of
Michigan; Prof. Lawrence J. White, Professor of
Economics, Stern School of Business of New York
University; Michael J. Wilson, Director, Legislative
and Political Action Department, United Food and
Commercial International Union. Also, several
organizations submitted record statements.
11 See Moratorium on Certain Industrial Loan
Company Applications and Notices, 71 FR 43482
(August 1, 2006).
Since the passage of the Competitive
Equality Banking Act of 1987 (CEBA),3
the industrial bank industry has
changed significantly. Between 1987
and 2006 total assets held by industrial
banks grew from $4.2 billion to $177
billion.
Since January 1, 2000, 24 industrial
banks became insured.4 As of January
30, 2007, there were fifty-eight insured
industrial banks with aggregate total
assets of approximately $177 billion.5
Six industrial banks reported total assets
of $10 billion or more; eleven other
industrial banks reported total assets of
$1 billion or more. The remaining forty-
one institutions, on average, reported
total assets of approximately $231.8
million. Forty-five of those fifty-eight
operated in Utah and California.6 Of the
fifty-eight existing industrial banks,
forty-three were either controlled by one
or more individuals or controlled by a
parent company whose business is
financial in nature. As of January 30,
2007, thirty-one of the fifty-eight
existing industrial banks were owned by
companies that were engaged solely in
financial activities and that were not
subject to Federal Consolidated Bank
Supervision; such companies are
hereinafter referred to as ‘‘Non-FCBS
Financial Companies.’’ Eight of the fifty-
eight industrial banks (representing
approximately sixty-nine percent of
industrial bank industry assets) were
owned by companies that are engaged
solely in financial activities and are
subject to consolidated supervision by
the FRB or the OTS. Four of the fifty-
eight industrial banks were owned by
individuals. Fifteen industrial banks
were subsidiaries of holding companies
that are non-financial in nature, i.e.,
commercial.
In 2005, the Government
Accountability Office (GAO) expressed
its concern that industrial banks owned
by commercial companies or other
entities without a Federal consolidated
supervisor created an uneven playing
field when compared to banks and
thrifts owned by holding companies
subject to Federal consolidated
supervision.7 The concerns regarding
the lack of consolidated supervision and
the possible limitations of the FDIC’s
authority echoed those previously
expressed by the FDIC’s Office of
Inspector General (OIG) in a 2004
report.8
Some industrial banks continue to be
small, community-focused institutions.
However, the FDIC has noted a recent
increase in the number of applications
for deposit insurance and notices of
change in control with respect to
industrial banks that would be affiliated
with commercial companies or other
entities that would not be subject to
Federal Consolidated Bank Supervision.
Such institutions are often large
organizations that tend to have complex
business plans. Their subsidiary
industrial banks tend to provide
specialty lending programs or financial
services or other support to the holding
company. Whatever their purpose or
structure, the industrial bank charter
has generated a significant amount of
public interest in recent years as various
entities have explored the feasibility
and business opportunities associated
with including an industrial bank as
part of their operations.
In 2006, the FDIC received more than
13,800 comment letters regarding the
proposed Wal-Mart Bank’s 2005 deposit
insurance application.9 Most of these
comments expressed opposition to
granting deposit insurance with respect
to this particular applicant; however,
some commenters raised more universal
concerns about industrial banks. Over
640 of the more general comments were
specifically focused on the risk posed to
the deposit insurance fund by industrial
banks owned by commercial companies
or by holding companies without a
Federal consolidated bank supervisor.
Similar sentiments were expressed by
witnesses during three days of public
hearings held by the FDIC regarding the
Wal-Mart application. In addition, the
Home Depot also filed a change in
control notice in connection with its
proposed acquisition of EnerBank, a
Utah industrial bank. In response to the
request for public comment on the
change in control notice, the FDIC
received approximately 830 comment
letters; almost all of them expressed
opposition to the proposed acquisition.
Congress also has had a continuing
interest in the industrial bank charter.
Most recently, on July 12, 2006, the
House Committee on Financial Services
(Committee) held a hearing regarding
industrial banks. At the hearing, the
General Counsels of the FDIC and FRB
testified before the Committee regarding
the history, characteristics, current
industry profile, and supervision of
industrial banks.10 The FDIC’s
testimony noted that today’s industrial
banks are owned by a diverse group of
financial and commercial entities.
Among industrial banks owned by such
entities are those that serve a particular
lending, funding, or processing function
within a larger organizational structure,
and those that directly support one or
more affiliate’s commercial activities.
The business plans for these industrial
banks differ substantially from the
consumer lending focus of the original
industrial banks.
Currently, eight industrial bank
deposit insurance applications are
pending before the FDIC. Also, in 2006
the FDIC received three additional
deposit insurance applications that were
either returned or withdrawn. In
addition, the FDIC received seven
change in control notices for the
acquisition of industrial banks; five of
which have been returned or
withdrawn. None of the potential parent
companies would be subject to Federal
Consolidated Bank Supervision, and at
least nine of the eighteen potential
parent companies are engaged in
activities that are considered
commercial in nature.
To evaluate the concerns and issues
raised with respect to industrial banks,
on July 28, 2006, the FDIC imposed a
six-month moratorium on FDIC action
with respect to certain industrial bank
applications and notices.11 The FDIC
declared the moratorium to enable it to
further evaluate (i) Industry
developments, (ii) the various issues,
facts, and arguments raised with respect
to the industrial bank industry, (iii)
VerDate Aug<31>2005 15:07 Feb 02, 2007 Jkt 211001 PO 00000 Frm 00034 Fmt 4703 Sfmt 4703 E:\FR\FM\05FEN1.SGM 05FEN1
mstockstill on PROD1PC66 with NOTICES
3 Public Law 100–86, 101 Stat. 552 (codified as
amended in various sections of title 12 of the U.S.
Code)
4 During 2000, 4 new industrial banks were
insured; 2 during each of 2001 and 2002; 5 during
2003; 6 during 2004; 4 during 2005; and 1 in 2006.
5 Based on reported assets as of September 30,
2006, the most recent reported data.
6 Industrial banks also operate in Colorado,
Hawaii, Indiana, Minnesota and Nevada.
7 U.S. Gov’t Accountability Office, GAO–05–621,
Industrial Loan Corporations: Recent Asset Growth
and Commercial Interest Highlight Differences in
Regulatory Authority 79–80 (2005) (hereinafter
‘‘GAO Report’’).
8 See Federal Deposit Insurance Corporation
Office of Inspector General, Report No. 2004–048,
The Division of Supervision and Consumer
Protection’s Approach for Supervising Limited-
Charter Depository Institutions (2004) (hereinafter
‘‘OIG Report’’).
9 See the FDIC’s Web site at http://www.fdic.gov/
regulations/laws/walmart/.
10 Industrial Loan Companies: A Review of
Charter, Ownership, and Supervision Issues:
Hearing Before the H. Comm. on Financial Services,
109th Cong. (2006). The Committee also heard
testimony from G. Edward Leary, Commissioner for
the Utah Department of Financial Institutions; Rick
Hilman, Director of Financial Markets and
Community Investment, U.S. Government
Accountability Office; George Sutton, Former
Commissioner for the Utah Department of Financial
Institutions; Terry Jorde, Chairman, President, and
CEO of CountryBank USA, Chairman of ICBA; John
L. Douglas, Partner, Alston & Bird; Arthur C.
Johnson, Chairman and CEO of United Bank of
Michigan; Prof. Lawrence J. White, Professor of
Economics, Stern School of Business of New York
University; Michael J. Wilson, Director, Legislative
and Political Action Department, United Food and
Commercial International Union. Also, several
organizations submitted record statements.
11 See Moratorium on Certain Industrial Loan
Company Applications and Notices, 71 FR 43482
(August 1, 2006).
Since the passage of the Competitive
Equality Banking Act of 1987 (CEBA),3
the industrial bank industry has
changed significantly. Between 1987
and 2006 total assets held by industrial
banks grew from $4.2 billion to $177
billion.
Since January 1, 2000, 24 industrial
banks became insured.4 As of January
30, 2007, there were fifty-eight insured
industrial banks with aggregate total
assets of approximately $177 billion.5
Six industrial banks reported total assets
of $10 billion or more; eleven other
industrial banks reported total assets of
$1 billion or more. The remaining forty-
one institutions, on average, reported
total assets of approximately $231.8
million. Forty-five of those fifty-eight
operated in Utah and California.6 Of the
fifty-eight existing industrial banks,
forty-three were either controlled by one
or more individuals or controlled by a
parent company whose business is
financial in nature. As of January 30,
2007, thirty-one of the fifty-eight
existing industrial banks were owned by
companies that were engaged solely in
financial activities and that were not
subject to Federal Consolidated Bank
Supervision; such companies are
hereinafter referred to as ‘‘Non-FCBS
Financial Companies.’’ Eight of the fifty-
eight industrial banks (representing
approximately sixty-nine percent of
industrial bank industry assets) were
owned by companies that are engaged
solely in financial activities and are
subject to consolidated supervision by
the FRB or the OTS. Four of the fifty-
eight industrial banks were owned by
individuals. Fifteen industrial banks
were subsidiaries of holding companies
that are non-financial in nature, i.e.,
commercial.
In 2005, the Government
Accountability Office (GAO) expressed
its concern that industrial banks owned
by commercial companies or other
entities without a Federal consolidated
supervisor created an uneven playing
field when compared to banks and
thrifts owned by holding companies
subject to Federal consolidated
supervision.7 The concerns regarding
the lack of consolidated supervision and
the possible limitations of the FDIC’s
authority echoed those previously
expressed by the FDIC’s Office of
Inspector General (OIG) in a 2004
report.8
Some industrial banks continue to be
small, community-focused institutions.
However, the FDIC has noted a recent
increase in the number of applications
for deposit insurance and notices of
change in control with respect to
industrial banks that would be affiliated
with commercial companies or other
entities that would not be subject to
Federal Consolidated Bank Supervision.
Such institutions are often large
organizations that tend to have complex
business plans. Their subsidiary
industrial banks tend to provide
specialty lending programs or financial
services or other support to the holding
company. Whatever their purpose or
structure, the industrial bank charter
has generated a significant amount of
public interest in recent years as various
entities have explored the feasibility
and business opportunities associated
with including an industrial bank as
part of their operations.
In 2006, the FDIC received more than
13,800 comment letters regarding the
proposed Wal-Mart Bank’s 2005 deposit
insurance application.9 Most of these
comments expressed opposition to
granting deposit insurance with respect
to this particular applicant; however,
some commenters raised more universal
concerns about industrial banks. Over
640 of the more general comments were
specifically focused on the risk posed to
the deposit insurance fund by industrial
banks owned by commercial companies
or by holding companies without a
Federal consolidated bank supervisor.
Similar sentiments were expressed by
witnesses during three days of public
hearings held by the FDIC regarding the
Wal-Mart application. In addition, the
Home Depot also filed a change in
control notice in connection with its
proposed acquisition of EnerBank, a
Utah industrial bank. In response to the
request for public comment on the
change in control notice, the FDIC
received approximately 830 comment
letters; almost all of them expressed
opposition to the proposed acquisition.
Congress also has had a continuing
interest in the industrial bank charter.
Most recently, on July 12, 2006, the
House Committee on Financial Services
(Committee) held a hearing regarding
industrial banks. At the hearing, the
General Counsels of the FDIC and FRB
testified before the Committee regarding
the history, characteristics, current
industry profile, and supervision of
industrial banks.10 The FDIC’s
testimony noted that today’s industrial
banks are owned by a diverse group of
financial and commercial entities.
Among industrial banks owned by such
entities are those that serve a particular
lending, funding, or processing function
within a larger organizational structure,
and those that directly support one or
more affiliate’s commercial activities.
The business plans for these industrial
banks differ substantially from the
consumer lending focus of the original
industrial banks.
Currently, eight industrial bank
deposit insurance applications are
pending before the FDIC. Also, in 2006
the FDIC received three additional
deposit insurance applications that were
either returned or withdrawn. In
addition, the FDIC received seven
change in control notices for the
acquisition of industrial banks; five of
which have been returned or
withdrawn. None of the potential parent
companies would be subject to Federal
Consolidated Bank Supervision, and at
least nine of the eighteen potential
parent companies are engaged in
activities that are considered
commercial in nature.
To evaluate the concerns and issues
raised with respect to industrial banks,
on July 28, 2006, the FDIC imposed a
six-month moratorium on FDIC action
with respect to certain industrial bank
applications and notices.11 The FDIC
declared the moratorium to enable it to
further evaluate (i) Industry
developments, (ii) the various issues,
facts, and arguments raised with respect
to the industrial bank industry, (iii)
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