|"The truth will make you
free, but first it will make you miserable." - Tom DeMarco
IS WAL-MART A BANK YET?
A new twist in Wal-Mart's interest in entering the banking arena
surfaced this week with a news report that the world's largest retailer
is piloting a program with a national bank to feature "Wal-Mart Money
Centers" in 16 of its stores in Tennessee and Georgia. The American
Banker reported Tuesday that Wal-Mart, through new signage and a Wal-Mart Money Center website, will be marketing an
array of financial services using the Wal-Mart Money Center brand,
referring to the Money Center as a division of the national bank it's
partnering with in this pilot program. According to the article, the
Office of the Comptroller of the Currency issued a "nonobjection" letter
to allow for the signage.
The Conference of State Bank Supervisors has been lambasted in the past
by industry groups that are staunchly opposed to Wal-Mart getting into
the banking business. In particular, critics believe that Wal-Mart,
which is precluded from acquiring a commercial bank charter, could enter
banking by obtaining an industrial loan company (ILC) charter from one
of the states that allow for the ILC charter.
CSBS President and CEO Neil Milner says the industry groups have
misconstrued the CSBS position as being in favor of Wal-Mart using the
ILC charter as a way to set up retail banking operations nationwide to
the detriment of local banks.
"Nothing could be further from the truth," Milner said. "We are very
sensitive to the competitive pressures that would come about if Wal-Mart
acquired a commercial bank, and we have a long tradition of supporting
Milner noted, however, that the lines of distinction between banking and
commerce have continued to blur, as banks and nonbank financial service
providers have entered into agency and marketing arrangements with
commercial firms. Wal-Mart already offers store credit cards,
international money transfers, money orders, ATMs, etc., and the company
reportedly rents space for some 800 in-store bank branches, operated by
both national and state-chartered banks. But until now, the banks'
signage was predominant, and customers were not confused about who was
operating the branch.
Milner questioned whether it was appropriate to allow Wal-Mart to use
signage implying that the in-store bank branch was a Wal-Mart operation
and whether the OCC should have allowed for the national bank's role to
be deemphasized through the use of small type in contrast to the size of
the lettering referencing Wal-Mart Money Center.
It brings to mind the old "if it walks like a duck, quacks like a duck"
argument. Pretty soon, people will think it's a duck. Will people think
that Wal-Mart is also a bank?
SENATE BANKING COMMITTEE APPROVES TOM CURRY FOR
This just in: The Senate Banking Committee this morning approved the
nomination of Thomas J. Curry to serve on the Federal Deposit Insurance
Corporation's board of directors. The nomination now goes to the full
Senate for a vote before becoming official. It is expected that Curry's
nomination will go before the Senate on its consent calendar, clearing
the way for a potential vote on the Senate Floor before they adjourn for
the year. President George W. Bush nominated Curry for the position on
June 12. Curry currently serves as Massachusetts Commissioner of Banks
and was chairman of the Conference of State Bank Supervisors in
2000-2001. If confirmed, Curry's appointment will run for a full six
years from the time of his confirmation.
HOUSE OKAYS MUTUAL FUND REFORM BILL; STATE ROLE
LAUDED DURING DEBATE
The House approved a mutual fund reform bill on Wednesday by a vote of
418-2. The legislation (H.R. 2420) is sponsored by Rep. Richard Baker
(R-La.) and would increase the transparency of fund fees and costs,
strengthen corporate governance and management integrity, and help
prevent trading fraud.
Some of the provisions in the bill include disclosing soft dollar
arrangements, requiring funds to disclose their portfolio manager
compensation, requiring two-thirds of all board directors to be
independent, banning short-term trading by insiders, and prohibiting a
single person from managing both mutual funds and hedge funds. Read more...
Meanwhile, the Senate Banking Committee held two days of hearings this
week to review current investigations and regulatory actions regarding
the mutual fund industry. Committee Chairman Richard Shelby (R-Ala.)
said the questionable funding practices that have surfaced in the mutual
fund industry appear not to be the result of a few bad apples, "but are
long-standing industry practices that have largely gone unregulated and
are not well disclosed to, or understood by, most investors." The
committee heard testimony from SEC Chairman William H. Donaldson,
Investment Company Institute President Matthew P. Fink and Securities
Industry Association President Marc Lackritz, National Association of
Securities Dealers Chairman and CEO Robert Glauber, and SEC Director of
Enforcement Stephen M. Cutler, and New York Attorney General Eliot
Spitzer's office is credited with much of the legwork that unveiled
recent scandals in the mutual fund business. During the hearing, several
Committee members commented on how important it is to have state
regulators involved in financial regulation.
Prior to the hearings, Donaldson and Snow sent a letter to Shelby and
Housing Financial Services Committee Chairman Michael Oxley (R-Ohio)
applauding efforts to protect the integrity of mutual funds, but also
seeking caution in developing remedies. The letter said mutual funds
play a major role in the national economy and "information and
disclosure requirements should be designed to provide investors with
real value rather than serve mainly to increase costs and decrease
CSBS TO PRESENT WEBCAST ON RISING INTEREST
After experiencing interest rates that would never seem to stop falling,
there are signs that rates may soon be on the upswing, posing challenges
of a different nature to bankers and customers, too. To help prepare you
for a rising interest rate environment, CSBS will present a 90-minute
live Webcast which will help you to chart a path through this new
environment. You will hear the latest on the economy, see the potential
impact of rising rates on a bank's financial condition, and learn the
latest strategies for managing in this changing environment. This
informative and timely program is a collaboration of CSBS, Olson
Research, Graduate School of Banking at Colorado, and School of
Community Bank Management at Texas Tech University. Mark your calendar
for 3 p.m. eastern, Thursday, December 18. To participate, all you need
is a computer with Internet access and a telephone. Registration for
this program is $245. Click here to learn more and register.
AROUND THE STATES
Pennsylvania: The Pennsylvania Secretary of Banking closed
Pulaski Savings Bank on Nov. 14, naming FDIC as the receiver. FDIC said
Pulaski's only banking office will reopen today as a branch of Earthstar
Bank with depositors of the failed bank automatically becoming
depositors of Earthstar. Pulaski had approximately $10.2 million in
assets and $9.2 million in deposits in 1,200 accounts. Earthstar paid
FDIC a premium of $400,000 to purchase $8.9 million of Pulaski's assets.
FDIC estimated that the failure will cost the Bank Insurance Fund $1.1
million. The failure was the first to occur in Pennsylvania since March
11, 1996, and the third failure this year of a BIF-insured bank. More information...
Texas: Texas banker Danny Payne will be the new Savings and Loan
Commissioner starting in early January, said Texas Finance Commission
Chairman Vernon Bryant on Nov. 17. Payne has 30 years' experience
as a senior manager of state and federally chartered banks and thrifts
in Texas. For the past three years, he has been president and chief
executive officer of Community State Bank in Austin. Previously, he
served as the first mortgage licensing director for the Texas Savings
and Loan Department. The Texas Savings and Loan Department oversees and
enforces regulations for 24 state savings banks and state savings and
loan associations with combined assets of more than $18 billion, and
approximately 30,000 licensed mortgage brokers and loan officers. In
January 2004, an estimated 3,000 mortgage banking companies doing
business in Texas will be required to register with the department. For
more information, click here.
AROUND THE AGENCIES
FinCEN: Financial institutions are providing valuable information
for investigating terrorist financing and money laundering, the
Financial Crimes Enforcement Network said in publishing its latest
review of suspicious activity reports released on Monday. From February
through Oct. 20, 2003, FinCEN said it sent information requests on 962
subjects involved in 167 cases to financial institutions. In response,
financial institutions provided 6,987 responses with 6,397 of the
responses positive and 338 inconclusive. FinCEN said these responses
were very helpful in speeding up investigations. The publication also
described potential terrorist financing methods using cash letters,
coupon redemption and informal value transfer systems. Read
FTC: The Federal Trade Commission charged Maryland-based
AmeriDebt, Inc.; DebtWorks, Inc.; and two individuals with engaging in
deceptive practices on Wednesday. FTC alleged that the non-profit credit
counseling agency falsely claimed that it charged no up-front fee for
its services; that it operated as a non-profit; and that it taught
consumers how to handle their finances. FTC said the organization failed
to provide the privacy notices required by the Gramm-Leach-Bliley Act.
The agency also settled a related action against Ballenger Group, LLC,
and its parent, Ballenger Holdings, which FTC alleged repeated some of
AmeriDebt's misrepresentations in statements to consumers on the
telephone. The individuals named in the case were Andris Pukke and
Pamela Pukke. "We will not allow consumers to be duped into
'contributing' hundreds of dollars to these so-called 'non-profits,'
that use the money to line their own pockets," said Howard Beales,
director of the FTC's Bureau of Consumer Protection. More information
about the case may be found at http://www.ftc.gov/opa/2003/11/ameridebt.htm.
NCUA: The National Federal Credit Union Administration issued an
opinion letter on Nov. 10 that said the agency's regulations would
preempt "any state law, including one affecting aspects of lending
primarily regulated by the provisions of the Truth in Lending Act, that
regulates the rates, terms of repayment and other conditions of loans
and lines of credit." NCUA was responding to an opinion request on
whether the Georgia Fair Lending Act would apply to a federal credit
union. On the issue of the authority of the Georgia Attorney General and
Georgia Commissioner of Banking and Finance to enforce the Georgia Fair
Credit Lending Act against federal credit unions, NCUA said it has "sole
authority" to take enforcement actions against federal credit unions.
For additional information, go to http://www.ncua.gov/ref/opinion_letters/2003_letters/03-0412.htm.
OTS: The most profitable community thrifts were generally active
lenders with a residential mortgage focus, but they also offered a broad
array of community loan products, according to an analysis issued by the
Office of Thrift Supervision on Tuesday. OTS examined the top performing
thrift institutions with less than $1 billion in assets and looked for
traits that contributed to their success. The study found that the top
thrifts were more active portfolio lenders, held fewer wholesale assets,
had better efficiency ratios and maintained good asset quality. Eighteen
percent of the top institutions had assets of less than $50 million and
55 percent had assets between $50 million and $250 million. Sixty-one
percent of the top performers were stock institutions. Some of their
common management strengths included prompt resolution of significant
regulatory concerns noted in prior exams, use of an effective
risk-focused internal audit process and oversight by an active board
that is fully informed by management. More information is available at
THE WEEK AHEAD
CSBS office will be closed Thursday and Friday.
"The OCC knows the problem. Inaction on grievous bank behavior will
provoke confrontations with the states. As Eliot Spitzer wrote in The
New York Times this week, the public will rely on state regulators if
the federal government won't protect their interests." - Duncan A.
MacDonald, former general counsel of Citigroup Inc.'s Europe and North
America card businesses, writing in a November 21 letter to the editor
of the American Banker.
Mary White, Editor
Teresa Dean, Contributing Writer