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Advocacy Alert- 05/27/2002

Information request: Inactive accounts

AB 1772 (Harman), which would require a specific statutory escheat notice to be sent to inactive account holders, will be heard by the Senate Judiciary Committee on June 4 in Sacramento. The required notice would have to specify the exact date of last account activity and other information relative to the account. To best educate legislators on why this legislation is unnecessary, we first need to present what the industry is already doing to warn customers of the possible escheatment of inactive accounts. Please, therefore, send us copies of the notices you currently use to warn customers of possible escheatment of inactive accounts. Send them to California Bankers Association; Attn.: Edward Levy; 1121 L Street, Suite 1050; Sacramento, CA 95814.

Oxley ekes out "close" vote on deposit reform 418-18

The Chairman Oxley juggernaut continued to roll when the House voted to pass H.R. 3717, the Federal Deposit Insurance Reform bill by the staggering margin of 418-18. Four Californians, Republicans Doug Ose, Ed Royce and Dana Rohrabacher, and Democrat Pete Stark along with six members of the Massachusetts delegation who were angry that FDIC closed its Boston office were among the 18 dissents

Ose led opposition to the provisions in the legislation that would increase the deposit ceiling on regular accounts to $130,000 and he was joined in the effort by Royce and Rohrabacher. Before the bill went to the floor, it was amended to eliminate the provision giving FDIC authority to specially assess the free riders of the future. Major national banking trade groups did not oppose removal of the provision which FDIC Chairman Powell stated he doubted the FDIC would ever use.

ABA felt that money provisions in the bill providing credits and a preference on dividend allocations to those who have paid premiums in the past is a more effective way of combating free riders. Another amendment lowered the maximum coverage on municipal deposits from $5 million to $2 million (CBA opposes any increase in this ceiling). The legislation now heads for the Senate where its prospects are not as bleak as many pundits believe.

Guess who's coming to California…

Wal-Mart's application to acquire a $2.4 million asset industrial bank, Franklin Bank of California, marks the giant retailer's third attempt to enter the banking business. Industrial banks are not permitted to accept demand deposits under California law but they may take savings deposits. The charter would also enable Wal-Mart to tap directly into national debt card networks. The transaction needs the approval of the California banking department which would have to find a legal basis for turning it down. FDIC's approval is also required, but FDIC examines only issues pertaining to insurability. But the most interested bystander of all might be the Fed. Owing to an exemption the industrial bank lobby obtained nearly 15 years ago, there is no registration requirement for companies that control industrial banks; hence the ability to combine banking and commerce. If Walmart has solved the mystery of entering the banking business on this, its third try, the registration exemption is certain to be reexamined in Washington.

Realtors continue to gain momentum

New co-sponsors of the realtor bill are being rounded up in the Senate, where the financial institutions subcommittee was scheduled to hold a hearing on the bill on May 23. Meanwhile, a House subcommittee which has no jurisdiction over the bill but does have a chairman very sympathetic to the realtors, held a hearing last week. Georgia's Bob Barr (of Clinton impeachment fame) heads up a Judiciary Committee Subcommittee on Commercial and Administrative law, and used the subcommittee's jurisdiction over administrative rule-making procedures as a pretext for the hearing. An ABA witness was asked whether the banking business might be willing to hold off its efforts for real estate brokerage for a few years. Maybe, said the witness, if realtors are willing to give up their incursions into mortgage brokerage and banking. Barr, who also sits on the Financial Services Committee said he might have the beginnings of a political deal.