WASHINGTON -- Comptroller of the Currency Eugene A. Ludwig defended the nascent Retirement CD this week against congressional criticism.

The tax-deferred, insured certificate of deposit "falls within the range of powers authorized for national banks and may be offered as a deposit product," Mr. Ludwig informed a powerful House committee chairman.

The new deposit product is attracting the interest of banks searching for a way to compete with annuities. But the Retirement CD also is attracting the ire of the insurance industry, which has ginned up opposition to the product among several prominent lawmakers.

Seen as Encroachment

"We see this as a serious encroachment in our business, and we will pursue all the legal means to address it. That includes legislation, litigation, and regulatory action," said Allen Caskie, senior counsel at the American Council of Life Insurance.

The insurers have a key ally in House Energy and Commerce Committee Chairman John D. Dingell, who in late May asked both the Comptroller and the Federal Deposit Insurance Corp. to reject the product. Both agencies cleared the way for Blackfeet National Bank to offer the Retirement CD on May 12.

The FDIC reiterated its opinion that the product is an insured deposit in a June 13 reply to Rep. Dingell. Mr. Ludwig responded in a June 23 letter, but neither Rep. Dingell's office nor the agency would release it. A copy of the letter was obtained from a third party Wednesday.

'Bank Obligation'

"In our view, the Retirement CD is not an insurance product, but rather a bank obligation not unlike the multitude of other bank obligations the OCC is charged every day with supervising and examining" Mr. Ludwig wrote.

Mr. Ludwig's response completes the loop of regulatory action. That moves action on the question to Capitol Hill, where Rep. Dingell has been joined by four senators who also oppose the Retirement CD.

Led by Sen. Christopher J. Dodd, D-Corm., and Sen. AIfonse M. D'Amato, R-N.Y., the lawmakers promised to introduce legislation killing the product in a June 20 letter to the regulators.

Insurers Turn to Lawmakers

While none are scheduled yet, hearings could be held on the product.

Insurance companies as well as insurance agents are pushing for confessional action.

"I think Chairman Dingell and others on Capitol Hill are extremely upset with the OCC," said Bob Rusbuldt, vice president of federal affairs at the Independent Insurance Agents of America. "The regulators have gone too far."

Mr. Rusbuldt argued in an interview on Wednesday that the Retirement CD could open up a huge new liability for the FDIC. The product, because it is insured, also could give banks an enormous competitive edge over insurance agents, he said.

If the insurance industry does not succeed in persuading Congress to reject the Retirement CD, then a lawsuit against the Comptroller is expected.

Patent Pending

The Retirement CD was developed by American Deposit Corp. in Pine, Colo. The firm has a patent pending on the product, with hopes of licensing it to banks across the country.

Blackfeet, a $12 million-asset bank in Browning, Mont., is the only bank now offering the CD.

The Retirement CD requires a minimum $5,000 deposit. The rate is set the first few years, but then may fluctuate above a 3% floor. Interest income is not taxed as it accumulates. according to American Deposit.

The depositor selects a maturity date, when up to two-thirds of the principal and interest may be withdrawn. The bank then pays out the balance in monthly. installments that continue as long as the customer lives.

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