CLE Materials for Panel #1 - George Washington University Law ...

WILMARTH
4/1/2011 1:11 PM
2011] The Dodd-Frank Act 989
that are “in default or in danger of default” (the “failing bank”
exception). 150
The emergency acquisitions of Countrywide, Merrill, Washington
Mutual (WaMu), and Wachovia in 2008 demonstrated the
significance of the Riegle-Neal Act’s loopholes and the necessity of
closing them. Based on the “non-bank” loophole, the FRB approved
Bank of America’s acquisitions of Countrywide and Merrill even
though (1) both firms controlled FDIC-insured depository institutions
(a thrift, in the case of Countrywide, and a thrift and industrial bank,
in the case of Merrill) and (2) both transactions allowed Bank of
America to exceed the 10% nationwide deposit cap. 151 Similarly,
after the FDIC seized control of WaMu as a failed depository
institution, the “non-bank” loophole enabled the FDIC to sell the
giant thrift to Chase even though the transaction enabled Chase to
exceed the 10% nationwide deposit cap. 152 Finally, although the FRB
determined that Wells Fargo’s acquisition of Wachovia gave Wells
Fargo control of just under 10% of nationwide deposits, the FRB
probably could have approved the acquisition in any case by
designating Wachovia as a bank in danger of default. 153
As a result of the foregoing acquisitions, Bank of America, Chase,
and Wells Fargo each surpassed the 10% nationwide deposit cap in
October 2008. 154 To prevent further breaches of the Riegle-Neal
Act’s concentration limits, I proposed that Congress should extend the
150 12 U.S.C. §§ 1831u(e), 1842(d)(5).
151 See Order Approving the Acquisition of a Savings Association and Other
Nonbanking Activities, 94 Fed. Res. Bull. C81–C82, C83 n.13 (Aug. 2008) (approving
Bank of America’s acquisition of Countrywide and Countrywide’s thrift subsidiary, even
though the transaction resulted in Bank of America’s ownership of 10.9% of nationwide
deposits); FRB Bank of America and Merrill Order, supra note 149, at B13–B14, B14 n.6
(approving Bank of America’s acquisition of Merrill and Merrill’s thrift and industrial
bank subsidiaries, even though the transaction resulted in Bank of America’s ownership of
11.9% of nationwide deposits).
152 Joe Adler, Thrift M&A Could Suffer as Frank Slams ‘Loophole,’ AM.BANKER, Dec.
10, 2009, at 1.
153 See Statement by the Board of Governors of the Federal Reserve System Regarding
the Application and Notices by Wells Fargo & Company to Acquire Wachovia
Corporation and Wachovia’s Subsidiary Banks and Nonbanking Companies, 95 Fed. Res.
Bull. B40, B41–42 (Mar. 2009) (determining that “the combined organization would not
control an amount of deposits that would exceed the nationwide deposit cap on
consummation of the proposal”); id. at B48 (concluding that “expeditious approval of the
proposal was warranted in light of the weakened condition of Wachovia”).
154 See Matt Ackerman, Big 3 Deposit Share Approaches 33%, AM. BANKER, Oct. 28,
2008, at 16 (reporting the nationwide deposit shares for Bank of America, Chase, and
Wells Fargo as 11.31%, 10.20%, and 11.18%, respectively).