Dear Chairman Gruenberg:
We urge the Federal Deposit Insurance Corporation to impose a moratorium on approving any applications for deposit insurance for any new industrial loan companies (ILCs) owned by commercial firms and on approvals for acquisitions of existing ILCs until Congress has had an opportunity to consider the ILC issue.
As you know, the House has twice this Congress and once last Congress passed provisions authored by Congressmen Gillmor and Frank that would restrict the authority of ILCs who come under the control of commercial firms after October 1, 2003 to engage in certain activities, specifically nationwide branching and paying interest on business negotiable order of withdrawal accounts. Some Members of Congress will soon be introducing legislation that will address the ILC issue in a comprehensive manner and as you know, last year Congressman Leach introduced HR 3882, a bill that would prohibit ownership of ILCs by any firm other than a bank holding company.
Further evidence that Congress is moving to address the issue are press reports that Chairman Bachus of the Financial Institutions Subcommittee has said that the subcommittee will hold hearings on the ILC issue later this year.
Over the past several years the number of commercial firms seeking to obtain an ILC charter has grown at an ever-increasing pace. What was once a minor exception to the general separation of banking and commerce has grown into an industry unto itself, with ever-larger commercial and retail firms seeking to obtain an ILC charter. While many of these firms say that they want to own an ILC for very narrow purposes, and file narrow business plans with their applications, it is not clear that the FDIC has the legal authority to permanently prevent them from engaging in activities that are permitted by their chartering state, so long as they remain well-capitalized and operate in a safe and sound manner. The issue of the powers of ILCs, and the extent of who may own an ILC, is an issue that Congress has begun to address, and the FDIC should wait until Congress has acted before authorizing any additional commercially-owned ILCs.
Signed, Representatives: Abercrombie, Aderholt, Alexander, Baca, Baird, Baldwin, Beauprez, Blumenauer, Bonner, Boswell, Capps, Capuano, Carson, Clay, Cramer, Danny Davis, DeFazio, DeGette, DeLauro, Drake, Edwards, Etheridge, Everett, Filner, Fitzpatrick, Fortenberry, Frank, Gillmor, Gohmert, Goode, Goodlatte, Gordon, Granger, Al Green, Gutierrez, Herseth, Hinojosa, Holden, Jackson-Lee, Tim Johnson, Steve King, LaHood, Latham, Leach, Lee, Levin, Lipinski, Frank Lucas, Lynch, Marchant, Markey, Marshall, Matsui, McCarthy, McCollum, McGovern, Michaud, Brad Miller, George Miller, Moore, Jerry Moran, Jim Moran, Musgrave, Nussle, Oberstar, Obey, Osborne, Pascrell, Paul, Pearce, Peterson, Pomeroy, David Price, Regula, Reichert, Robal-Allard, Mike Rogers (AL), Tim Ryan, Salazar, Linda Sanchez, Sanders, Schakowsky, Schiff, Schwartz, Sherman, Slaughter, Adam Smith, Chris Smith, Solis, Stupak, Tubbs Jones, Mark Udall, Visclosky, Wasserman Schultz, Waters, Watson, Watt, Wu.