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FDIC Federal Register Citations

July 12, 2001

Robert E. Feldman
Executive Secretary
Attention: Comments/OES
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429

Re: Being "Engaged in the Business of Receiving Deposits Other Than Trust Funds"

Dear Mr. Feldman:

WebBank supports the proposed rule clarifying that, for the purposes of the Federal Deposit. Insurance Act, the requirement of "engaged in the business of receiving deposits other than trust funds" is satisfied by the continuous maintenance of one or more non-trust deposit accounts in the aggregate amount of $500,000.

We have relied on the FDIC position as enunciated in General Counsel Opinion No. 12 and proposed 12 C.F.R. 303.14 based on first-hand experience and external evidence. Our Utah industrial loan corporation accepts broker deposits only. We applied for insurance in 1998 and have been availing ourselves of the powers and privileges of FDIC insurance and respecting the corresponding responsibilities and restrictions for three years. Also, we have depended upon the FDIC's long history of granting insurance to institutions like Bessemer Trust and other non-traditional depository institutions that accepted only one type of deposit (e.g., checking accounts for trust customers or escrow accounts relating to mortgage loans). FDIC practice indicated, and we have believed, that the statutory standard could be satisfied by a single type of deposit. The proposed rule would remove any uncertainty as to this widely-held assumption.

Without question, the portion of the statute at issue is-unclear and "receiving deposits" could mean any number of things. The FDIC has properly addressed this ambiguity, filling in the blanks to the extent needed: the number of-deposits (one), the minimum amount ($500,000) and the time period (continuous). There is simply no basis for inserting the further requirement that deposits must be accepted from the general public, nor does the minimum number of deposits need to be increased to two, as suggested by a recent federal district court opinion.

Moreover, allowing the FDIC's broad interpretation to prevail creates no particular risk; the determination of whether or not an institution is "engaged in the business of receiving deposits other than trust funds" is only a threshold matter. Before an application is approved, the FDIC must consider seven factors to determine if the issuance of federal insurance is warranted. See 12 U.S.C. 1816, Statement of Policy on Applications for Deposit Insurance, 63 FR-44752 (Aug. 20, 1998). In other words, because the FDIC does not have unfettered discretion to insure institutions, it is appropriate and reasonable that the agency have some leeway in determining the extent to which an institution "receives deposits."

We very much appreciate this opportunity to comment upon the proposed rule and applaud the FDIC's efforts to achieve consistency and uniformity in the interpretation of this key statutory phrase.

Kenneth H. Petersen
President and Chief Executive Officer
Last Updated 07/17/2001

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