Academic journal article ABA Banking Journal

Unitary Thrift Loophole

Academic journal article ABA Banking Journal

Unitary Thrift Loophole

Article excerpt

The unitary thrift loophole, much like its strategic ancestor, the nonbank bank loophole, had been lurking in the banking code for years, waiting to be discovered. This loophole was even larger than the earlier one, because it permitted a combination of banking and commerce that worried many--especially community bankers and House Banking Committee Chairman Jim Leach.

Gramm-Leach-Bliley closes the loophole:

* The new law forbids commercial companies from chartering new thrifts. Specifically, de novo unitary thrift applications received by the Office of Thrift Supervision after May 4, 1999, will not be approved. Applications already in the pipeline as of that date can be acted on.

* Unitaries in existence before May 4, 1999, or prospective unitaries with applications filed before that date, are grand-fathered. However, existing unitaries can only be sold to financial companies if their current owner no longer wishes to hold them.

Winners: Numerous nonbank organizations won unitary thrift charters after the idea caught on, including many insurance companies, a retailer, and a funeral-industry company.

Among the winners that banks will still worry about: State Farm's State Farm Bank FSB; the Farm Bureau's Farm Bureau Bank, FSB; FMR Corp.'s Fidelity Personal Trust Co.; and Archer-Daniels-Midland's Hickory Point Bank and Trust, FSB (conversion).

Losers: With the May cutoff date, some companies that climbed aboard the bandwagon later on turned out to be too late. Among these filers was, most notably, Wal-Mart, which filed its application in late July. …

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