Congressmen seek backing for bank limits
Frank, chairman of the House Financial Services Committee, and Gillmor, an Ohio Republican on the panel, wrote to all members of the House of Representatives Tuesday asking them to back a bill that would bar new industrial banks owned by commercial companies.
The bill, which may be introduced next week, would "maintain the necessary historic separation between banking and commerce," Frank, a Massachusetts Democrat, and Gillmor wrote in the letter.
Industrial banks are limited-service, state-chartered institutions that can make loans and process credit-card transactions. Wal-Mart, the world's largest retailer, applied in July 2005 to open an industrial bank in Utah. That proposal drew opposition from banks, fearing widespread competition from Wal-Mart, based in Bentonville, Ark.
The Frank-Gillmor proposal would allow the banks to go forward if owned by financial service companies. It would block new applications like those pending for Wal-Mart, Home Depot, the world's largest hardware-store chain, and Ford Motor Co., the second-biggest U.S. automaker.
Frank and Gillmor plan to introduce the measure before the Jan. 31 meeting, said Gillmor spokesman Bradley Mascho. The legislation will mirror a measure they introduced last year that stalled.
Besides banning new industrial banks owned by commercial firms, it would require all companies that own industrial banks to register with the FDIC and be regulated as holding companies.
The House is expected to pass the legislation. It faces a less certain future in the U.S. Senate.
Robert Bennett, a high-ranking Republican member of the Senate Banking Committee, said in an interview he "would probably oppose" the bill in its present form. Bennett opposes limits on industrial banks, a major industry in his home state of Utah. Adequately funded banks haven't engaged in any abuses that call for legislative action, he said.
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