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Rep. Jim Hackworth - House District 33
IMMEDIATE RELEASE
March 8, 2007
Bill Prohibiting Retailers from Becoming Banks Moves through House
Committees
Lawmakers Also Advance
‘Truth in Music Advertising Act’
NASHVILLE (Mar. 8) – Two
significant consumer protection bills are winding their way through
committee hearings in the state House of Representatives. One measure
stops commercial firms from engaging in unregulated banking activities
in the state. The other bill protects the names of established musical
acts from being fraudulently used in concert bookings.
The Utilities and
Banking Subcommittee advanced a bill that bans large retailers from
becoming banks, bringing the measure one step closer to final action.
The full Commerce Committee must now decide if lawmakers should
preemptively stop merchandisers from setting up industrial banks in
their retail chains in Tennessee, according to Rep.
Jim Hackworth,
D-
Anderson County.
“Such banks create an
uneven playing field for financial service institutions. Under current
banking law, it’s conceivable that industrial banks based in Utah,
Colorado, Nevada and California could open branches in our state. We
don’t want that. It’s a bad idea,” explained
Hackworth.
Federal laws prohibit
mixing banking and commerce, but a loophole allows commercial ownership
of Industrial Loan Companies (ILCs). These ILCs are basically
state-chartered “non-bank banks” that offer traditional commercial,
mortgage, credit card and consumer loan services. In addition, these
industrial banks have access to the federal safety net, but they’re not
subject to Federal Reserve supervision and regulation.
“This supervision
protects the safety and soundness of financial institutions which have
access to federal deposit insurance, and the Federal Reserve’s discount
window and payments system. Because the taxpayer backs the system, it’s
in Tennessee’s interest to keep unregulated large retailers from
concentrating assets, stifling competition and hurting our citizens,”
said Hackworth.
There are 58 ILCs
operating in seven states with $177 billion in assets and eight ILC
applications pending before the Federal Deposit Insurance Corp. (FDIC).
Among the applicants are Wal-Mart Stores, Inc., Home Depot, Inc., and
DaimlerChrysler. The BlueCross-BlueShield Association recently dropped
its bid to open an industrial bank, although the FDIC approved its
application.
According to the FDIC,
Wal-Mart claimed its bank would handle only the estimated 140 million
credit card, debit card and electronic check payments it processes
annually. Home Depot wanted to offer mortgages to consumers.
BlueCross/BlueShield’s application to the FDIC said its bank would
administer health savings accounts and other plans offered by its
insurers.
“It’s important to
recognize that lawmakers aren’t targeting retailers who lease space on
their property to independent bankers. For example, some banks have
opened branches inside supermarkets. Because the bank and grocery chains
are separate businesses with different owners, the ban on ILCs doesn’t
apply. Neither company exists to lend money to itself,” said
Hackworth.
In January the FDIC
imposed a one-year moratorium on applications for industrial banks. This
action followed a decision by the US Congress to revisit the 50-year-old
federal Bank Holding Company Act that regulates financial institutions
and authorizes industrial banks.
“These policy
inconsistencies and loopholes aren’t good banking policy. Even Federal
Reserve chairman Ben Bernanke and former chairman Alan Greenspan have
called for closing the loophole on industrial banks. Three states have
passed similar laws, and Tennessee has joined eleven other states with
pending legislation,” said
Hackworth.
In other action, the
Consumer and Employee Affairs Committee approved a bill that prohibits
persons without connections to a well-known, established musical group
from falsely using the group’s name in advertisements and performances.
The “Tennessee Truth in Music Advertising Act” is now before the House
Calendar and Rules Committee, the final step before a floor vote.
“This bill prevents
musicians from performing under a group’s name unless they are the
authorized trademark owners. Another exception exists if one member of
the performing group was an original member of the recording group and
never abandoned using the name. Otherwise, the performance must be
identified as a salute or tribute,” explained
Hackworth.
The measure mostly
applies to oldies acts from the 1950s and 1960s, particularly Top 40
singing groups whose individual members aren’t easily recognizable.
Unscrupulous agents or promoters who falsely book venues under a group’s
name can be charged with a misdemeanor offense and subjected to other
civil penalties.
“If the package or
pricing for a show is too good to be true, it probably is. The authentic
artist is cheated of income and audiences are duped out of their
hard-earned money,” concluded
Hackworth.
CONTACT:
Kenneth Townsend, Press Secretary, House Democratic Caucus, at
615-741-6620 or email
kenneth.townsend@legislature.state.tn.us.
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