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The HQ Conundrum
PIGNANELLI: The banks are growing but the number of banks is not. There’s a de facto FDIC moratorium on applications for financially owned ILCs. The moratorium that was placed in the Dodd Frank bill is lifted in July of next year. So technically there would be no reason, other than to go through the state and federal application process, to start approving industrial banks. Politically it’s a different issue at the FDIC.
Our job is to educate people in Washington D.C. and throughout the country that one of the ways to help solve the debt crisis is to allow more applications and change of business plans for industrial banks, both commercially and financially owned.
We are among the safest and soundest financial institutions in the country. Almost all the industrial banks survived the crisis, providing all sorts of opportunities for consumers throughout the country.
Are you seeing any sort of regulatory pressure to have the ILCs convert to a state or federal charter?
PIGNANELLI: We faced a number of those a few years ago. They made a number of banks— Goldman Sachs, for example—give up their ILC charter in order to get the TARP funds. A number of those banks went ahead and did that. A lot expressed sorrow that they had to do that, because it was giving up a very healthy limb on their body for no reason whatsoever.
But that pressure is off now, other than some external factors. But for the most part we are very healthy and looking forward to having a great conversation with the FDIC and with members of Congress about this being a great conduit for getting capital back in the market.
SUTTON: To clarify, this moratorium affects all banks. In roughly 2008, the FDIC just closed its applications office and locked the door and has not gone back into business yet. If they were processing applications, the industrial banks in Utah would be many times larger than they are right now. I worked on a community bank application that ran into the same brick wall. They are just not approving anything.
In 2006, if I’m recalling this correctly, there were about 400 bank applications approved nationally. In 2010 there were four. So everything is in a state of paralysis right now.
PIGNANELLI: Our office gets calls almost weekly from national organizations—solid, strong organizations, companies and others who have all sorts of funds. They want to get them in the marketplace. They’d like to do it through industrial banks and other ways and they can’t get it approved. This is ridiculous. This is an opportunity to revitalize the economy and we are being stonewalled on this.
I heard there are some areas of regulatory authority that CFPB thinks they have that another entity has. Are you seeing that?
LEARY: In the first year that they were born, they hired 1,000 employees. They are all trying to get those horses pulling in the same direction, which is not easy.
Because of the large institutions that we have headquartered here, we have had the opportunity to coordinate with the CFPB, the FDIC and the Federal Reserve in doing some examinations. The get-acquainted period has been tough, on occasion, but I think it’s getting better. Precisely where one agency’s jurisdiction ends and another starts is still being defined. In some cases it’s probably not being defined very easily nor very quickly. So it will remain as another area of uncertainty going forward.
The Dodd Frank Act, one of the few good things mandated is that the CFPB has to work with the states, not just the banking department, the attorney general’s office. So while they very clearly have a task ahead of them for consumer protection, how they go about it, they still have some maneuver room. I would hope they continue to foster coordination and cooperation within the existing structure.
Talk to the readers about the current environment. Is now the time to go ahead with business plans? What should they do to make sure they can get loans?
CAMARELLA: When I look at the long term, what I see is the continuing need for education. It’s taking charge of becoming better educated on the issues. How do you buy a home? Well, I need to be educated in terms of getting and managing credit, getting a better job. There’s a lot of it that ultimately comes down to individuals taking ownership.
BEARD: There’s some basic values that people need to be taught about money. It’s a tool, and it can hurt you or help you. When you talk about credit, responsible use of credit makes sense, meaning you use it for a house. You use it for those things that are going to give you a return. You don’t use it for things that are consumer goods that you just use up.
Part of the responsibility of the population is to try to educate themselves on it. The banks ought to be helpful in that. We do try to help people understand some of the basics of economics. If you are a young person and just starting out, I think having a credit card is an appropriate thing. To pay it off every month is an appropriate thing so you develop a credit history. You develop the discipline of using money as a tool to get the values that you have in your life. But it doesn’t become a dominant influence in your life in terms of distorting what you know or what you’re doing. Banks can assist in that, and want to assist in that, for the most part.