Utahn attacks bill to bar banking by retail firms
Leary cites successes in Beehive State, calls proposal 'unnecessary'
Leary was a dissenting voice at a hearing examining a bill that would not allow any commercial companies to own an industrial loan corporation, while federal regulators urged Congress to make a decision soon so they can move forward with their own work.
The bill not only bars commercial retailers from applying for the banks but also expands the Federal Deposit Insurance Corp.'s examination and enforcement powers over industrial-bank holding companies. It also restricts commercially owned industrial banks from branching across state lines.
"This bill seeks to remove a potential threat even before a threat has materialized," Leary said. "There has not been an industrial bank failure warranting this change in public policy."
Utah is home to 32 of the 58 industrial banks in the United States and holds $186.2 billion in industrial bank assets, Leary said.
"Utah industrial banks are safe, sound and appropriately regulated by both the state, which charters them, and the FDIC, which is the relevant federal regulator and deposit insurance provider," Leary said, adding that the industrial loan industry makes up only 1.8 percent of the total banking assets. "This is not a systemic crisis that threatens banking."
Retailing giant Wal-Mart had applied to open a bank in Utah, which it claimed it would use only to process credit card or debit card payments. But that proposal sparked a controversy about mixing commerce and banking for fear Wal-Mart would open banking branches in its stores.
Wal-Mart has since dropped its bid, and the FDIC has a yearlong moratorium in place on any further decisions on industrial bank applications by commercial companies.
Leary said the bill, which was written primarily in response to Wal-Mart's application, "would dismantle a Utah banking industry of 31 charters and a regulatory structure that has matured over 20 years with a record of safe, sound operations to forestall one entity from being granted a charter."
Leary said 22 of Utah's industrial bank assets would be considered held by financial companies, with nine by nonfinancial entities, such as Target, Volkswagen and BMW.
"This bill, with its provisions that are designed to block any and all conceivable ways in which a retailer may employ an industrial bank charter today or in the future, are disappointingly anti-competitive and anti-consumer," Leary said.
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