WASHINGTON - General Motors Corp. won government approval Thursday to charter a thrift, giving the automotive giant authority to broaden the range of financial services offered by its GMAC Mortgage Corp subsidiary.
GMAC Mortgage will be an operating subsidiary of the thrift, GMAC Bank, and would instantly be one of the country's largest originators and servicers of residential mortgages and home equity loans, the Office of Thrift Supervision said.
GMAC Bank will have only one office, located in Wilmington, Del., and will conduct most of its business through GMAC Mortgage, which has about 170 retail branches and 1.6 million customers.
The company said it expects to begin operations in the second half of this year. The OTS said the company made a $6 billion Community Reinvestment Act commitment.
"A federal savings bank will enable us to expand the GMAC brand by offering a wide range of financial products and services to customers including banking services, home finance products, and investment and insurance options," said R. Michael O'Brien, GMAC Residential Holding Corp. president and CEO.
While nonfinancial companies' chartering of thrifts has been a controversial public policy issue, Scott M. Albinson, OTS managing director of supervision, said the approval process went smoothly.
"Amazingly, it was a pretty plain-vanilla application in terms of what their proposed operation would be," he said. "Our problems were getting a handle on the structure and the functions to be performed inside the thrift."
Bankers lobbied last year to keep nonfinancial companies out of the business, and the Gramm-Leach-Bliley Act of 1999 bars their entry. But the law said OTS could rule on the nonfinancial companies with applications pending as of May 5, 1999. GM was one of the firms that made the deadline.
"There are some remaining applications and unfortunately GM was one of them," said Kenneth A. Guenther, executive vice president of the Independent Community Bankers of America. "We regret it, but we remain pleased that the Congress has spoken on the banking and commerce issue.
Still pending are applications filed by Deere & Co., Ford Motor Co., General Electric Co.'s GE Capital, and American Express Co.
The most recent thrift charter granted to a commercial enterprise went to Federated Department Stores, owner of Bloomingdale's and Macy's.
Charles J. Hamm, chairman, president, and chief executive officer of Independence Bancorp in Brooklyn, said GM's entry into the business increases the pressure on banks to be more efficient.
This is "diminishing the ability to function on anything other than personal service," he said.
"It's just another competitor that we as community banks are going to have to be aware of," said Daniel L. Krieger, president of Ames National Corp. of Iowa, a four-bank holding company with $630 million of assets. "If they wanted to, GM could open a bank in Ames, Iowa."
Alan Kline contributed to this article.