WASHINGTON, July 12 /U.S. Newswire/ -- In written testimony submitted to the House Subcommittee on Financial Institutions and Consumer Credit, the National Association of Realtors (r) urged Congress to consider tightening the loophole that permits commercial firms to control federally insured banks.

NAR explained that recent applications for federal deposit insurance by Wal-Mart and Home Depot for industrial loan companies have again raised deep concerns about the dangers of mixing banking and commerce. NAR's testimony emphasizes that the FDIC would set a dangerous precedent if it approves Wal-Mart's and Home Depot's applications.

"When commercial firms are allowed to engage in banking, the bank's commercial parent runs the risk of using the bank to further the corporate objectives of the company, creating an inherent and irreconcilable conflict of interest," said Tom Stevens, president of NAR. "The best interests of the customer, competitors, the bank subsidiary, and our financial system could all take a back seat to the parent company."

In his testimony, Stevens said, "We believe that mixing banking and commerce creates risks to the financial system because a bank owned by a commercial firm may not have the freedom to exercise the discipline needed to make independent credit judgments. NAR urges Congress to send a clear signal to the Board of Directors of the FDIC by imposing a moratorium on the approval of any commercial companies' applications to establish or acquire ILCs."

Also today, NAR reiterated its strong support for bi-partisan legislation that would protect America's financial systems by closing the loophole that allows retail and commercial firms to own industrial loan companies (ILCs).

The Industrial Bank Holding Company Act of 2006 (H.R. 5746), introduced on Monday by Congressman Paul Gillmor (R-Ohio) and Congressman Barney Frank (D-Mass), restores the traditional separation of banking and commerce, prohibits the Federal Deposit Insurance Corp. from granting new charters to commercial firms looking to start or acquire an ILC, and strengthens FDIC enforcement and regulation.

"NAR has consistently voiced our concerns about the dangers that occur when banking and commerce are permitted to mix," said Stevens. "This legislation sends a strong signal to the FDIC to delay action on all pending commercial companies' applications for federal deposit insurance for ILCs."

In June, NAR sent a letter to the FDIC opposing the Home Depot acquisition of EnerBank, a Utah ILC. In April, NAR President Tom Stevens testified at an FDIC hearing opposing Wal-Mart's application for an ILC.

H.R. 5746 would address the ILC loophole by prohibiting any additional commercial firms from directly or indirectly controlling an industrial bank. The bill defines a commercial firm as any entity that generates at least 15 percent of its annual gross revenues from non-financial activities. It would prohibit Wal-Mart, Home Depot and several other commercial firms from chartering or acquiring an industrial bank.

The Gillmor/Frank bill also directly addresses concerns about future banking activities by providing for strong oversight and regulation. Specifically, all industrial bank holding companies will be required to register with the FDIC and be supervised, similar to the way holding companies are supervised by the Federal Reserve.

The National Association of Realtors (r), "The Voice for Real Estate," is America's largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.

Information about NAR is available at http://www.realtor.org. This and other news releases are posted in the Web site's "News Media" section in the NAR Media Center.

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REALTOR (r) is a registered collective membership mark which may be used only by real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS (R) and subscribe to its strict Code of Ethics.

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To: National Desk, Business Reporter

Contact: Mary Trupo of the National Association of Realtors, 202-383-1007 or mtrupo@realtors.org

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