Texas-Chartered Banks Dispute Regulator's Powers
O'Hara, Terrence, American Banker
In a rare fight pitting state-chartered banks against their regulator, several Texas banks may challenge the state banking commissioner's ability to make policy.
The dispute began early this year when the commissioner, Catherine Ghiglieri, proposed regulations on mortgage warehousing activities at state-chartered banks.
Several small, state-chartered banks cried foul, saying the rules would put them at a competitive disadvantage with national banks, which have no mortgage warehousing regulations. In mortgage warehousing, a bank gives a mortgage banker a line of credit to fund mortgages until they can be sold on the secondary market.
The bankers launched a campaign within the Texas Bankers Association to file a lawsuit to limit Ms. Ghiglieri's ability to write regulations that differ from regulations followed by national banks.
"I think the way they've handled this issue is very inappropriate," said Ms. Ghiglieri, who began rewriting the 45-year-old Texas banking code this summer.
"What she did in writing the mortgage rule was illegal on its face," said Jerry Blaschke, chief executive of Fidelity Bank in Fort Worth, which would be affected by the rule. "It's unconstitutional because she did not follow the Administrative Procedures Act."
Yet, Mr. Blaschke insists the dispute is not "just about our mortgage practices," but a bona fide constitutional question about regulatory powers. In 1984, the state constitution was amended to allow the 525 state-chartered banks the same privileges as nationally chartered banks.
Ms. Ghiglieri and her predecessor took the view that the amendment was "permissive," meaning that state-chartered banks could engage in national-bank practices with the permission of the state regulator.
But Mr. Blaschke and a number of bankers in Texas believe that the amendment is "self-activating," meaning it automatically grants state banks all the powers enjoyed by national banks.
"The problem comes in when you have banking laws on the books that don't jibe with national law," she said. …