DOCSLIB.ORG

Rules and Regulations Federal Register Vol

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Rules and Regulations Federal Register Vol 10703 Rules and Regulations Federal Register Vol. 86, No. 34 Tuesday, February 23, 2021 This section of the FEDERAL REGISTER Review Examiner, (508) 698–0361, nonmember banks,1 including industrial contains regulatory documents having general Extension 8027, [email protected]; Don banks and industrial loan companies applicability and legal effect, most of which Hamm, Special Advisor, (202) 898– (together, ‘‘industrial banks’’).2 In are keyed to and codified in the Code of 3528, [email protected]; Patricia granting deposit insurance, issuing a Federal Regulations, which is published under Colohan, Associate Director, Risk non-objection to a change in control, or 50 titles pursuant to 44 U.S.C. 1510. Management Examinations Branch, approving a merger, the FDIC must 3 The Code of Federal Regulations is sold by (202) 898–7283, [email protected], consider the factors listed in sections 6, the Superintendent of Documents. Division of Risk Management 7(j),4 and 18(c),5 respectively, of the Supervision. Federal Deposit Insurance Act (FDI Act). Congress expressly made all industrial FEDERAL DEPOSIT INSURANCE SUPPLEMENTARY INFORMATION: banks eligible for Federal deposit CORPORATION 6 Table of Contents insurance in 1982. As deposit insurer and as the appropriate Federal banking 12 CFR Part 354 I. Policy Objectives agency for industrial banks, the FDIC RIN 3064–AF31 II. Background supervises industrial banks. A key part A. History of its supervision is evaluating and Parent Companies of Industrial Banks B. Industrial Bank Exclusion Under the mitigating the risks arising from the and Industrial Loan Companies BHCA activities of the control parties and C. Industry Profile owners of insured industrial banks to AGENCY: Federal Deposit Insurance D. Supervision ensure they do not threaten the safe and Corporation. E. GAO and OIG Reports sound operations of those industrial ACTION: Final rule. F. FDIC Moratorium and Other Agency Actions banks or pose undue risk to the Deposit SUMMARY: The Federal Deposit G. 2007 Notice of Proposed Rulemaking— Insurance Fund (DIF). Insurance Corporation is adopting a Part 354 Existing State and Federal laws allow final rule that requires certain H. Dodd-Frank Act and Industrial Banks both financial and commercial conditions and commitments for each III. The Proposed Rule companies to own and control deposit insurance application approval, IV. Discussion of General Comments and industrial banks. Congress expressly non-objection to a change in control Final Rule adopted an exception to permit such notice, and merger application approval A. General Comments companies to own and control that would result in an insured 1. Banking and Commerce industrial banks, without becoming a 2. Lack of Federal Consolidated industrial bank or industrial loan bank holding company (BHC) under the Supervision Bank Holding Company Act (BHCA), as company becoming, on or after the 3. Consumer Protection Risks effective date of the final rule, a part of the Competitive Equality 4. Justification for the Proposed Rule Banking Act of 1987 (CEBA).7 Industrial subsidiary of a company that is not B. Description of the Final Rule banks today are owned by financial and subject to consolidated supervision by 1. Section 354.1—Scope the Federal Reserve Board. The final 2. Section 354.2—Definitions nonfinancial commercial firms. The rule also requires that before any 3. Section 354.3—Written Agreement FDIC has in recent years received industrial bank or industrial loan 4. Section 354.4—Required Commitments applications from groups seeking to company may become a subsidiary of a and Provisions of Written Agreement establish new industrial banks that company that is not subject to 5. Section 354.5—Restrictions on Industrial would be owned by commercial parents. consolidated supervision by the Federal Bank Subsidiaries of Covered Companies Proposals regarding industrial banks Reserve Board, such company and the 6. Section 354.6—Reservation of Authority have presented unique risk profiles industrial bank or industrial loan 7. Responses to Additional Questions compared to traditional community company must enter into one or more V. Expected Effects written agreements with the Federal A. Overview of Industrial Banks 1 See 12 U.S.C. 1811, 1818, 1821, 1831o–1, B. Analysis of the Commitments Deposit Insurance Corporation. 1831p–1. C. Safety and Soundness of Affected Banks 2 Herein, the term ‘‘industrial bank’’ means any DATES: The rule is effective on April 1, D. Broad Effects on the Banking Industry insured State-chartered bank that is an industrial 2021. E. Expected Effects on Consumers bank, industrial loan company, or other similar FOR FURTHER INFORMATION CONTACT: F. Expected Effects on the Economy institution that is excluded from the definition of ‘‘bank’’ in the Bank Holding Company Act pursuant Amanda Ledig, Attorney, (202) 898– VI. Regulatory Analysis to 12 U.S.C. 1841(c)(2)(H). State laws refer to both 7261, [email protected]; Merritt Pardini, A. Regulatory Flexibility Act industrial loan companies and industrial banks. For Counsel, (202) 898–6680, mpardini@ B. Paperwork Reduction Act purposes of this rule, the FDIC is treating the two fdic.gov; Joyce Raidle, Counsel, (202) C. Plain Language types of institutions as the same. The rule does not apply to limited purpose trust companies and credit 898–6763, [email protected]; Gregory D. Riegle Community Development and Regulatory Improvement Act of 1994 card banks that also are exempt from the definition Feder, Counsel, (202) 898–8724, gfeder@ of ‘‘bank.’’ E. Congressional Review Act fdic.gov; Catherine Topping, Counsel, 3 12 U.S.C. 1816. (202) 898–3975, [email protected]; I. Policy Objectives 4 12 U.S.C. 1817(j). Mark Flanigan, Senior Counsel, (202) 5 12 U.S.C. 1828(c). 898–7426, [email protected]; Ashby The Federal Deposit Insurance 6 Garn-St. Germain Depository Institutions Act of Corporation (FDIC) monitors, evaluates, 1982, Public Law 97–320, 96 Stat. 1469 (Oct. 15, Hilsman, Assistant General Counsel, 1982). (202) 898–6636, [email protected], and takes necessary action to ensure the 7 Public Law 100–86, 101 Stat. 552 (Aug. 10, Legal Division; Scott Leifer, Senior safety and soundness of State 1987). VerDate Sep<11>2014 21:28 Feb 22, 2021 Jkt 253001 PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 E:\FR\FM\23FER1.SGM 23FER1 10704 Federal Register / Vol. 86, No. 34 / Tuesday, February 23, 2021 / Rules and Regulations bank proposals. These profiles have industrial banks and their parent of both a State authority and the FDIC.13 included potential owners that would companies.11 The chartering States gradually not be subject to Federal consolidated The FDIC is now issuing a final rule, expanded the powers of their industrial supervision,8 affiliations with which is largely consistent with the banks so that today industrial banks organizations whose activities are proposed rule. The final rule makes four generally have the same commercial and primarily commercial in nature, and substantive changes to the proposed consumer lending powers as non-community bank business models.9 rule. First, the final rule requires commercial banks. compliance from covered entities on or Under the FDI Act, industrial banks Given the continuing interest in the are ‘‘State banks’’ 14 and all of the industrial bank charter and the evolving after the effective date of the rule rather than simply after, as proposed. Second, existing FDIC-insured industrial banks business models, the FDIC proposed a 15 the final rule requires additional are ‘‘State nonmember banks.’’ As a rule in March 2020 to codify existing result, the FDIC is the appropriate practices utilized by the FDIC to reporting by Covered Companies regarding systems for protecting the Federal banking agency for industrial supervise industrial banks and their 16 security, confidentiality, and integrity of banks. Each industrial bank is also parent companies, to mitigate undue consumer and nonpublic personal regulated by its respective State risk to the DIF that may otherwise be information. Third, the threshold chartering authority. The FDIC generally presented in the absence of Federal regarding the limitation of a Covered exercises the same supervisory and consolidated supervision of an Company’s representation on the board regulatory authority over industrial industrial bank and its parent company, of a subsidiary industrial bank has been banks as it does over other State and to ensure that the parent company raised in the final rule from 25 percent, nonmember banks. that owns or controls an industrial bank as proposed, to less than 50 percent. B. Industrial Bank Exclusion Under the serves as a source of financial strength Lastly, the final rule modifies the BHCA for the industrial bank, consistent with restrictions on industrial bank section 38A of the FDI Act.10 The subsidiaries concerning the In 1987, Congress enacted the CEBA, proposed rule described certain appointment of directors and senior which exempted industrial banks from commitments that would be required as executive officers to apply to the the definition of ‘‘bank’’ in the BHCA. a condition of the FDIC’s approval of, or industrial bank only during the first As a result, parent companies that non-objection to, each deposit insurance three years after becoming a subsidiary control industrial banks are not BHCs under the BHCA and are not subject to application, change in control notice, or of a Covered Company. These changes the BHCA’s activities restrictions or FRB merger application resulting in an are discussed in sections IV.B.1., supervision and regulation. The industrial bank becoming a subsidiary IV.B.4., and IV.B.5. of this Supplementary Information section industrial bank exception in the BHCA of a company not subject to therefore allows for commercial firms to consolidated supervision by the Federal below. In addition to providing this comprehensive framework for own or control a bank. By contrast, Reserve Board (FRB; each such parent BHCs and savings and loan holding company a Covered Company).
Load more

Recommended publications
  • Observations on Regulation D and the Use of Reserve Requirements
    United States Government Accountability Office Report to Congressional Requesters October 2016 FEDERAL RESERVE Observations on Regulation D and the Use of Reserve Requirements GAO-17-117 October 2016 FEDERAL RESERVE Observations on Regulation D and the Use of Reserve Requirements Highlights of GAO-17-117, a report to congressional requesters Why GAO Did This Study What GAO Found Section 19 of the Federal Reserve Act The methods by which depository institutions can implement Regulation D requires depository institutions to (Reserve Requirements of Depository Institutions) include maintaining reserves maintain reserves against a portion of against transaction accounts and enforcing a numeric transfer and withdrawal their transaction accounts solely for the (transaction) limit for savings deposits if they wish to avoid classifying those implementation of monetary policy. accounts as reservable transaction accounts. GAO estimates that 70–78 percent Regulation D implements section 19, of depository institutions limit savings deposit transactions. Other methods and it also requires institutions to limit include automatically transferring balances from transaction (e.g., checking) certain kinds of transfers and accounts to savings deposits in order to reduce reserve requirements. Institutions withdrawals from savings deposits to may choose to maintain transaction account reserves against savings deposits to not more than six per month or eliminate the need to enforce the transaction limit. But some institutions GAO statement cycle if they wish to avoid having to maintain reserves against surveyed indicated that they had operational burdens associated with monitoring these accounts. The transaction limit and enforcing the transaction limit (for example, 63–73 percent cited challenges, allows the Federal Reserve to such as creating forms and converting and closing accounts).
    [Show full text]
  • A Requiem for Sam's Bank
    Chicago-Kent Law Review Volume 83 Issue 2 Symposium: Rethinking Payments in Article 18 Law April 2008 A Requiem for Sam's Bank Ronald J. Mann Follow this and additional works at: https://scholarship.kentlaw.iit.edu/cklawreview Part of the Law Commons Recommended Citation Ronald J. Mann, A Requiem for Sam's Bank, 83 Chi.-Kent L. Rev. 953 (2008). Available at: https://scholarship.kentlaw.iit.edu/cklawreview/vol83/iss2/18 This Article is brought to you for free and open access by Scholarly Commons @ IIT Chicago-Kent College of Law. It has been accepted for inclusion in Chicago-Kent Law Review by an authorized editor of Scholarly Commons @ IIT Chicago-Kent College of Law. For more information, please contact [email protected], [email protected]. A REQUIEM FOR SAM'S BANK RONALD J. MANN* INTRODUCTION Wal-Mart's application to form a bank ignited controversy among dis- parate groups, ranging from union backers to realtors' groups to charitable organizations.' The dominant voices, though, were those of independent bankers complaining that the big-box retailer would drive them out of busi- ness. Wal-Mart denied any interest in competing with local banks by open- ing branches, 2 claiming that it was interested only in payments processing. Distrusting Wal-Mart, the independent bankers urged the Federal Deposit Insurance Corporation (FDIC) to deny Wal-Mart's request and lobbied state and federal lawmakers to block Wal-Mart's plans through legislation. Ultimately, Wal-Mart withdrew its application, concluding that it stood little chance of overcoming the opposition. The controversy dovetails with a banking regulatory concern about the existing system for supervising commercial firms that own non-traditional banks.
    [Show full text]
  • The Bank Holding Company Act of 1956
    THE BANK HOLDING COMPANY ACT OF 1956 T HE Bank Holding Company Act of 1956,1 designed principally to regulate the expansion of bank holding companies and to insure the separation of banking and nonbanking enterprises,' is perhaps the most important banking legislation of the past two decades. The im- mediate economic consequences of the act are themselves deserving of comment, 3 but, even more significantly, the act represents the first comprehensive congressional action with regard to multiple banking through the use of the holding company. Though of comparatively recent origin,4 the bank holding company device has become as prom- inent as both the other forms of multiple banking, chains5 and branches,6 largely because of the economic inadequacies of the former 7 and the legal restrictions imposed upon the latter.8 A brief historical survey of bank holding company -development will serve to highlight an analysis of the act itself. Historically, the independent, unit bank, with its welfare dependent upon the economic health of the small area it serves, has too frequently been unable to withstand the adverse affect of even brief, localized eco- nomic depression2 Particularly in the small towns of the agrarian West and South during the i92O's and 193O's, bank suspensions occurred at an astonishing rate." Some form of multiple banking which could 70 STAT. 133, 12 U.S.C.A. §§ 1841-48 (Supp. 1956). sS. REP. No. 1095, 84 th Cong., ist Sess. 2 (.955). s See note 131 infra. 'The first independently capitalized bank holding company was the Marine Ban- corporation organized in Seattle, Washington in 1927.
    [Show full text]
  • Blackrock, Inc
    February 13, 2012 BY ELECTRONIC SUBMISSION Department of the Treasury Securities and Exchange Commission Office of Domestic Finance 100 F Street, N.E. 1500 Pennsylvania Avenue, N.W. Washington, D.C. 20549 Washington, D.C. 20520 Re: File Number S7-41-11 Board of Governors of the Federal Reserve System Office of the Comptroller of the Currency 20th Street and Constitution Avenue, N.W. 250 E Street, S.W. Washington, D.C. 20551 Washington, D.C. 20219 Re: Docket No. R-1432 and RIN 7100-AD82 Re: Docket ID OCC-2011-14 Federal Deposit Insurance Corporation Commodity Futures Trading Commission 550 17th Street, N.W. 1155 21st Street, N.W. Washington, D.C. 20429 Washington, D.C. 20581 Re: RIN 3064-AD85 Re: RIN 3038-AD05 RE: Notice of Proposed Rulemaking Prohibitions and Restrictions on Proprietary Trading and Certain Interests in, and Relationships with, Hedge Funds and Private Equity Funds Dear Sir or Madam: BlackRock, Inc. appreciates the opportunity to provide comments on the new Section 13 (the “Volcker Rule”) of the Bank Holding Company Act of 1956 (the “BHC Act”) to the regulatory agencies (the “Agencies”) charged with its implementation.1 BlackRock is an independently-managed public company (NYSE: BLK) that engages solely in providing asset management and risk management services to its clients. We manage over $3.5 trillion on behalf of institutional and individual clients worldwide through a variety of equity, fixed income, cash management, alternative investment, real estate and advisory products. Our client base includes corporate, public and multi-employer pension plans, insurance companies, mutual funds and exchange-traded funds, endowments, foundations, charities, corporations, government and other official institutions, banks and individuals around the world.
    [Show full text]
  • Capital Markets
    U.S. DEPARTMENT OF THE TREASURY A Financial System That Creates Economic Opportunities Capital Markets OCTOBER 2017 U.S. DEPARTMENT OF THE TREASURY A Financial System That Creates Economic Opportunities Capital Markets Report to President Donald J. Trump Executive Order 13772 on Core Principles for Regulating the United States Financial System Steven T. Mnuchin Secretary Craig S. Phillips Counselor to the Secretary Staff Acknowledgments Secretary Mnuchin and Counselor Phillips would like to thank Treasury staff members for their contributions to this report. The staff’s work on the report was led by Brian Smith and Amyn Moolji, and included contributions from Chloe Cabot, John Dolan, Rebekah Goshorn, Alexander Jackson, W. Moses Kim, John McGrail, Mark Nelson, Peter Nickoloff, Bill Pelton, Fred Pietrangeli, Frank Ragusa, Jessica Renier, Lori Santamorena, Christopher Siderys, James Sonne, Nicholas Steele, Mark Uyeda, and Darren Vieira. iii A Financial System That Creates Economic Opportunities • Capital Markets Table of Contents Executive Summary 1 Introduction 3 Scope of This Report 3 Review of the Process for This Report 4 The U.S. Capital Markets 4 Summary of Issues and Recommendations 6 Capital Markets Overview 11 Introduction 13 Key Asset Classes 13 Key Regulators 18 Access to Capital 19 Overview and Regulatory Landscape 21 Issues and Recommendations 25 Equity Market Structure 47 Overview and Regulatory Landscape 49 Issues and Recommendations 59 The Treasury Market 69 Overview and Regulatory Landscape 71 Issues and Recommendations 79
    [Show full text]
  • Banker" Redirects Here
    Bank From Wikipedia, the free encyclopedia Jump to: navigation, search For other uses, see Bank (disambiguation). "Banker" redirects here. For other uses, see Banker (disambiguation). "Bankers" redirects here. For the economics book, see The Bankers. This article has multiple issues. Please help improve it or discuss these issues on the talk page. • It needs additional references or sources for verification.Tagged since July 2008. • It may require general cleanup to meet Wikipedia's quality standards. Tagged since June 2010. Banking Types of banks Central bank Advising bank Commercial bank Community development bank Credit union Custodian bank Depository bank Export credit agency German public bank Investment bank Industrial bank Islamic banking Merchant bank Mutual bank Mutual savings bank National bank Offshore bank Private bank Savings and loan association Savings bank Swiss bank Universal bank Deposit accounts Savings account Transactional account Money market account Time deposit ATM card Debit card Credit card Electronic funds transfer Automated Clearing House Electronic bill payment Giro Wire transfer Banking terms Anonymous banking Automatic teller machine Loan Money creation Substitute check List of banks Finance series Financial market Financial market participants Corporate finance Personal finance Public finance Banks and Banking Financial regulation v·d·e Finance Financial markets [show] Bond market Stock market (equity market) Foreign exchange market Derivatives market Commodity market Money market Spot market (cash market)
    [Show full text]
  • Close Industrial Loan Company Loophole
    CLOSE INDUSTRIAL LOAN COMPANY LOOPHOLE INDUSTRIAL LOAN COMPANIES: “BANKS” In the age of big data, social media and e-commerce OWNED BY COMMERCIAL COMPANIES conglomerates, this threat is greater now than it was in Industrial loan companies (ILCs) are the functional the 1930s. We should be cautious before giving these equivalent of full-service banks. They engage in companies yet more reach into the economic life of commercial and consumer lending as well as deposit Americans by allowing them to leverage ownership taking and have access to the Federal Reserve of bank-like ILCs. The integration of technology and payments system. A loophole in the Bank Holding banking firms would not only result in an enormous Company Act allows commercial companies to own concentration of financial and technological assets but or acquire ILCs, subject only to approval by the FDIC. also would pose conflicts of interest in our banking Federal law prohibits all other full-service banks, system and privacy concerns for consumers. whether federal or state chartered, from being owned What will happen when social media giants extend their by commercial companies. reach into our financial lives? Access to Americans’ The ILC charter historically been limited and may be personal, financial data—monthly paycheck direct issued by only a handful of states, though it grants the deposits, account balances, expense patterns, political power to operate nationwide. Prior to 2020, the FDIC contributions, history of late fees, transaction records, had not approved deposit insurance for a new ILC for etc.—would create a whole new level of targeted more than 10 years.
    [Show full text]
  • FEDERAL RESERVE SYSTEM 12 CFR Part 217 Regulation Q Docket
    FEDERAL RESERVE SYSTEM 12 CFR Part 217 Regulation Q Docket No. R-1506 RIN 7100–AE 27 Regulatory Capital Rules: Regulatory Capital, Final Rule Demonstrating Application of Common Equity Tier 1 Capital Eligibility Criteria and Excluding Certain Holding Companies from Regulation Q AGENCY: Board of Governors of the Federal Reserve System. ACTION: Final rule. SUMMARY: The Board of Governors of the Federal Reserve System (Board) is adopting amendments to the Board’s regulatory capital framework (Regulation Q) to clarify how the definition of common equity tier 1 capital, a key capital component, applies to ownership interests issued by depository institution holding companies that are structured as partnerships or limited liability companies. In addition, the final rule amends Regulation Q to exclude temporarily from Regulation Q savings and loan holding companies that are trusts and depository institution holding companies that are employee stock ownership plans. DATES: The final rule is effective January 1, 2016. Any company subject to the final rule may elect to adopt it before this date. FOR FURTHER INFORMATION CONTACT: Juan Climent, Manager, (202) 872-7526, Page Conkling, Senior Supervisory Financial Analyst, (202) 912-4647, Noah Cuttler, Senior Financial Analyst, (202) 912-4678, Division of Banking Supervision and Regulation, Board of Governors of the Federal Reserve System; or Benjamin McDonough, Special Counsel, (202) 452-2036, or Mark Buresh, Senior Attorney, (202) 452-5270, Legal Division, 20th Street and Constitution Avenue NW., Washington, DC 20551. Users of Telecommunication Device for Deaf (TDD) only, call (202) 263-4869. SUPPLEMENTARY INFORMATION: I. Background In July 2013, the Board adopted Regulation Q, a revised capital framework that strengthened the capital requirements applicable to state member banks and bank holding companies (BHCs) and implemented capital requirements for certain savings and loan holding companies (SLHCs).1 Among other changes, Regulation Q introduced a common equity tier 1 capital (CET1) requirement.
    [Show full text]
  • Bank Holding Company Supervision Manual
    International Banking Activities Section 2100.0 2100.0.1 FOREIGN OPERATIONS OF banking and financing operations, some of U.S. BANKING ORGANIZATIONS which the parent banks themselves are not per- mitted to undertake under existing laws. These U.S. banking organizations may conduct a wide corporations may act as holding companies, pro- range of overseas activities. The Federal vide international banking services, and finance Reserve has broad discretionary powers to regu- industrial and financial projects abroad, among late the foreign activities of member banks and other activities. bank holding companies (BHCs) so that, in Sections 25 and 25A of the Federal Reserve financing U.S. trade and investments abroad, Act grant Edge Act and agreement corporations these U.S. banking organizations can be com- authority to engage in international banking and petitive with institutions of the host country foreign financial transactions. The Board’s without compromising the safety and soundness Regulation K (12 CFR 211.6) also outlines the of their U.S. operations. permissible activities of Edge and agreement Some of the Federal Reserve’s responsibili- corporations in the United States. Among other ties over the international operations of member activities, these corporations may (1) make for- banks (national and state member banks) and eign investments that are broader than those BHCs include permissible for member banks, and (2) conduct a deposit and loan business in states, including • authorizing the establishment of foreign those where the parent of the Edge or agreement branches of national banks and state member corporation does not conduct such banking banks and regulating the scope of their activi- activities, provided that the business is strictly ties; related to international or foreign business.
    [Show full text]
  • Revisiting the History of Bank Holding Company Regulation in the United States
    2011-2012 THAT WHICH WE CALL A BANK 113 THAT WHICH WE CALL A BANK: REVISITING THE HISTORY OF BANK HOLDING COMPANY REGULATION IN THE UNITED STATES SAULE T. OMAROVA* ** MARGARET E. TAHYAR Introduction ....................................................................... 114 I. Background: Bank Holding Company Regulation in the United States ...................................................................... 117 A. The BHCA Statutory Scheme: Brief Overview ............ 118 B. The Shifting Policy Focus of the BHCA ....................... 120 II. Back to the Beginning: The Birth of the Statute ................ 129 III. Who Is In? The Evolution of the Statutory Definition of “Bank” ............................................................................... 138 A. The 1966 Amendments ................................................. 139 B. The 1970 Amendments ................................................. 142 C. The Competitive Equality Banking Act of 1987 ........... 153 IV. Who Is Out? Exemptions from the Definition of “Bank” under the BHCA ................................................................. 158 A. Industrial Loan Corporations ........................................ 158 B. Credit Card Banks ......................................................... 169 C. Limited Purpose Trust Companies ................................ 173 D. Credit Unions ................................................................ 174 E. Savings Associations ..................................................... 179 V. Looking Back, Thinking Forward:
    [Show full text]
  • Regulating the Investment Banks and Gses After the Subprime Crisis
    1 Regulating the Investment Banks and GSEs After the Subprime Crisis Dwight M. Jaffee Haas School of Business, University of California, Berkeley Email: [email protected] Date: October 23, 2008 1. Introduction This paper offers a framework and a specific proposal for the re-regulation of the US investment banks and the government sponsored enterprises (GSEs, that is, Fannie Mae and Freddie Mac) in the aftermath of the subprime mortgage crisis. The largest investment banks are now all operating within bank holding company structures, but the regulatory issues remain; indeed, the bank holding company structure makes it more important than ever to deal with the regulatory issues of the investment banks.1 It may seem optimistic to refer to the subprime crisis in the past tense, but I believe this will soon be true, and that Congress and the new Administration will give their highest priority to the re-regulation of the US financial system. US financial history is replete with examples of a dialectic in which financial sector innovations create financial crises and financial crises create new regulatory structures. In both directions, we find an admirable record of success. First, financial system regulation has invariably responded to crises created by new financial market innovations, and almost always with long-lasting benefits. The following are examples of the impressive track record of regulatory responses to past financial crises: • The National Bank Act of 1863 created federal chartering and regulation of commercial banks to control “wildcat banking.” This legislation also created the Treasury Department and the Office of the Comptroller of the Currency.
    [Show full text]
  • Legislative Fiscal Bureau
    Fiscal Services Division Legislative Services Agency Fiscal Note SF 2030 - Automated Teller Machine Sales Tax Exemption (LSB 5028 XS) Analyst: Jeff Robinson (Phone: (515) 281-4614) ([email protected]) Fiscal Note Version - New Requested by Senator Pat Ward Description Senate File 2030 exempts service charges assessed by financial institutions from sales/use tax where the person being assessed the charge is a customer of the financial institution assessing the service charge. Service charges include point-of-sale purchases, automated teller machine (ATM) charges, and potentially any other service charge assessed to the customer. The Bill would take effect July 1, 2006. Background “Financial institution” is defined as a state or federal bank, credit union, savings and loan, industrial loan company, or any affiliate of one of those organizations. Under current law, service charges assessed by financial institutions against non-customers of that institution are exempt from State sales tax. This is generally limited to ATM charges assessed to persons using the ATM where the ATM is not owned by the customer’s bank. Any service charge assessed by a financial institution against a checking account of the institution’s own customer are currently subject to sales tax. This would include ATM transactions involving an ATM owned by the customer’s bank or charges for use of an ATM not owned by the customer’s bank. The same is true for point-of-sale fees, if any. Financial institutions also currently charge customers service fees for other checking account related actions, including fees to stop payments, card issuance/replacement, insufficient funds, certified checks, etc.
    [Show full text]