FDIC
Federal Register Citations California
Association of REALTORS®
May 13, 2005
Executive Secretary Robert E. Feldman
Attn: Comments/Legal ESS
Room 3060
Federal Deposit Insurance Corporation
550 17th Street, N.W.
Washington, DC 20429
Re: PR-25-2005
Public Hearing on Preemption Petition
Executive Secretary Feldman:
On behalf of the 155,000 members of the
California Association of REALTORS®, I submit the following
written statement for the Federal Deposit Insurance Corporations
(FDIC) Public Hearing on the Financial Services Roundtable (FSR)
Preemption Petition. C.A.R.s members are engaged in the business
of real estate brokerage, sales, management and financing.
REALTORS® are active in their communities as small businesses,
homeowners, and concerned citizens. REALTORS® believe that
homeownership is the best way to build community participation and
a better quality of life for all Americans. Because of the vital
role banks play in the real estate industry, as well as in
community development and consumer protection, C.A.R. is asking
the FDIC to reject the Petition for Preemption. The FDIC should
take this opportunity to protect the dual banking system in the
U.S. and acknowledge the right of states to regulate banking
within their borders.
The FSR petition directly threatens the
sovereignty of every state, as well as each states authority to
govern and regulate banking within its own borders. C.A.R.
believes every citizen of a state should have a say in how a bank
conducts business and is regulated within their states. Through
active state legislatures that can respond to the needs of the
consumer and business environment within their borders, laws and
regulations that best suit the need of the citizens of the state
can be achieved quickly and effectively. States such as
California, where the consumers have asked for strong consumer
protection laws on issues such as predatory lending, disclosures,
environmental, and others, should be allowed to regulate
state-chartered businesses within its borders. This allows
Californias consumers the choice of banking at a federally
chartered bank, or a state-chartered bank regulated by
Californias own laws. Preemption of state laws and regulations
for state-chartered banks would strip the consumer of this choice,
the states protection, and access to a dual banking system.
The dual banking system that the U.S. currently
has is unique throughout the world and has provided unmatched
benefits to its citizens. The products, services, security,
convenience, and choice offered by the dual banking system are the
bedrock which the U.S. financial system is built upon. When the
National Bank Act of 1863 was enacted, many thought it was only a
matter of time until all state-chartered banks switched, thus
eliminating state-chartered banks for good. In fact, in the long
term, quite the opposite has happened. While the FSR would have
you believe that state-chartered banks are unable to compete with
federally chartered banks, the higher number of new
state-chartered banks throughout the U.S. would prove quite the
opposite. According to the conference of State Bank Supervisors,
78% of all de novo banks chartered since January 1st 2000 chose
the state charter. C.A.R. also agrees with, and asks the FDIC to
consider the Office of the Comptroller of the Currencys statement
that, Indeed, differences that may be controversial today are at
the very heart of the dual banking system and are inextricably
linked to the benefits and success we associate with the dual
system. New banks recognize these differences and, as the numbers
have proven, over three quarters of them choose to charter at the
state level.
Todays dual banking system naturally evolved
and has been so successful because of the different roles that
state chartered and federally chartered banks play. State banks
are there to service the needs of the communities, and to shape
and create products and services specialized for those
communities. In contrast, the role of federally chartered banks is
to support a stable national currency, finance commerce, and
support the nations economic growth and development. While the
FSR would like parity between state and federal banks, the truth
is there never was meant to be parity because their roles are not
the same. As the Office of the Comptroller of the Currency stated
in a September 2003 report, State banking does not deliver the
benefits of having separate state systems serve as laboratories
if state bank powers simply copycat national bank powers, or if
state consumer protection standards that would otherwise be
applicable to state banks are waived whenever such a law is
preempted as applied to a national bank.
The end result of preempting state laws for
state-chartered banks would not ensure the continued vitality of
the dual banking system, as the FSR would like you to believe.
Instead, the end result would be an entirely different dual
banking system. One where nationally chartered banks are regulated
and governed by federal regulation, and state chartered banks are
regulated and governed by one single state. A state that is
willing to impose little-to-no regulatory restrictions on banks,
and that is willing to forgo consumer protection in lieu of lax
banking regulations. This would result in the worst scenario
imaginable: banks shopping for the state with the most lenient
regulation.
Federal Reserve Board Chairman Alan Greenspan
stated to an annual meeting of the Conference of State Bank
Supervisors that, The ability of the state to produce an
innovative and vibrant alternative to the federal structure has
continued for over 130 years and can only be applauded. C.A.R.
agrees with this assessment and, in conclusion, asks the FDIC to
maintain and protect the dual banking system that has fostered the
U.S. economy, and to respect the sovereignty of the states and
their rights to regulate banking within their borders. In
addition, to recognize the success of the free market at work,
that banks can choose whichever charter they prefer, and that over
three quarters of newly chartered banks prefer a state charter.
Thank you for your consideration of our views.
If we may provide you with any additional information, please do
not hesitate to contact Matthew Roberts, Public Policy Analyst, by
phone 213-739-8284, fax 213-739-7255 or e-mail matthewr@car.org.
Sincerely,
Jim Hamilton
President
California Association of REALTORS®