WASHINGTON — Rep. Paul E. Gillmor is one of the House's best-known critics of a law that lets commercial companies enter the banking business through an industrial loan company charter.
What's less well known is that the Ohio Republican is the chairman of Old Fort Banking Co., a $357 million-asset subsidiary of Gillmor Financial Services Inc., named for the lawmaker's late father, Paul M. Gillmor.
Rep. Gillmor, 68, is also organizing Panther Community Bank in Lehigh Acres, Fla., with other Old Fort investors. The start-up is seeking a national bank charter from the Office of the Comptroller of the Currency.
He sees no conflict of interest in being both a banker and the top Republican on the House Financial Services financial institutions subcommittee.
"The question is whether you have a Congress where nobody who sits on a committee knows anything, or do you try to have people who have some background and knowledge," he said in an interview. "I'd like to have veterans on the Armed Services Committee. I think it's good to have farmers on the [Agriculture] Committee."
However, in light of the ILC debate and his leadership position on the financial institutions subcommittee, Rep. Gillmor has asked the Ethics Committee to weigh in. There is no deadline for the committee's decision.
When he took his seat in 1989, he asked the panel for a ruling on whether his involvement with Gillmor Financial was a conflict of interest. The Ethics Committee said then that he could remain on the bank's board and keep his stock if he did not vote on legislation that benefited solely his bank.
In addition to his co-sponsorship of legislation that would prevent retailers like Wal-Mart Stores Inc. and Home Depot Inc. from getting ILC charters and competing with banks, Rep. Gillmor has introduced legislation that would provide coverage for 80% of a municipality's deposits above the Federal Deposit Insurance Corp.'s standard $100,000 limit. A municipal depositor's coverage would be capped at $2 million.
(Similar provisions he introduced in the previous three congressional sessions passed the House but failed to clear the Senate.)
Increasing insurance coverage for municipal deposits would benefit Rep. Gillmor's bank — nearly 20% of Old Fort's $316 million of deposits are from municipalities, well above the industry average.
Stanley M. Brand, who was general counsel to the House and a special counsel to the Ethics Committee before entering private practice, said Rep. Gillmor has done nothing inappropriate.
"The rules generally say you should not vote on matters in which you have a direct, pecuniary interest," he said. "I don't know if we're there yet" regarding Rep. Gillmor, because his ILC bill would affect all community banks.
But Mr. Brand also said that Congress is much more sensitive to such issues today than it was when Rep. Gillmor got his first Ethics Committee opinion.
The legislator was never an employee of Gillmor Financial, but he has been on the board since 1967 and the chairman since 2005, when his father died.
And a spokesman for Rep. Gillmor said he does not take a salary from the bank and simply attends the board's monthly meetings.
According to a Dec. 31, 2005, filing with the Federal Reserve Board, Rep. Gillmor and his sister, Dianne Krumsee, each own roughly 27% of Gillmor Financial. On his 2006 financial disclosure, Rep. Gillmor valued his stake in the bank at more than $5 million and less than $25 million.
His connection to Old Fort is not well known among industry representatives in Washington. In fact, Old Fort is a member of the Independent Community Bankers of America, whose executives had no idea Rep. Gillmor had a connection to the bank.
Sources were unwilling to risk offending the legislator by discussing his banking interests on the record, but many said they were particularly surprised to hear he is involved with chartering a new bank. For instance, neither Wal-Mart nor Home Depot would discuss the matter.
But Michael M. Van Buskirk, the president and chief executive of the Ohio Bankers League, said, "I would argue that any good congressman would pay a lot of attention to people in his district. Paul — granted, he's the chairman of a bank — has an unusual concentration of community banks in his congressional district, and in Ohio."
The municipal deposit bill addresses a vital need in Ohio, Mr. Van Buskirk said. Unlike other states, Ohio does not have a state-mandated insurance fund to protect municipal deposits and requires towns to collateralize their holdings in a bank, presenting challenges to where jurisdictions hold their money.
"We actually think it's a good thing to have someone on the [Financial Services] committee who actually understands what banking is," Mr. Van Buskirk said.
Besides, other sources said that Rep. Gillmor has not always supported measures encouraged by the commercial banking industry.
Robert L. Palmer, the president and chief executive officer of the Community Bankers Association of Ohio, cited credit union issues as an example. (Old Fort is a member of both state trade groups.)
"Has he voted on every issue relevant to credit unions that we would want him to vote in favor of? Not necessarily," Mr. Palmer said. "I think he has voted for what he believes to be in the best interest of his constituency, but we obviously have particular items that we would like to see him be more aggressive on."
Even Americans for Banking Competition, an association of roughly 40 ILCs, including some owned by commercial parents, said it has no problem with Rep. Gillmor's dual roles.
"We would not ever allege" that Rep. Gillmor has a conflict of interest, said William Nixon, the spokesman for the group, which includes EnerBank USA, the Utah ILC that Home Depot wants to buy.
"You've got dozens and dozens of attorneys on Capitol Hill who also support the American trial lawyers in their fight against tort reform," said Mr. Nixon, who runs the Washington lobbying firm Policy Impact Communications.
House Financial Services Chairman Barney Frank and Rep. Gillmor reintroduced their bill to bar commercial ILC owners last month.
"There's no public purpose served by permitting Wal-Mart to own a bank," Rep. Gillmor said in the interview. "Secondly, if you look at their track record, why do we have any reason to believe they would self-limit themselves, when in the past they've made it clear that they want to go much broader than that?
"They've been trying to get into full-scale banking for 10 years."
Rep. Gillmor is quick to insist his visible stand on ILCs is not borne out of a competitive concern, nor is it limited to Wal-Mart.
"The concern would be the same whether I were involved" in a bank "or not," he said. "The issue is do you let an industrial or commercial company own a financial institution and go into banking using ILCs, even though other companies can't? I don't think you should. … It could be Wal-Mart, or Jiffy Mart, or whoever.
"I'm not going to characterize it as a Wal-Mart bill, because it's not. … [Wal-Mart] just happens to be an example. When you're the biggest company in the world, people pay more attention."
Rep. Gillmor, who first introduced ILC legislation with Rep. Frank in 2003, commended the FDIC for giving Congress another year to pass its ILC bill. (On Jan. 31 the agency extended a moratorium on applications by commercial companies to buy or charter ILCs.)
The bill has attracted 49 co-sponsors and could pass the House this year, but it faces longer odds in the Senate, because Sen. Bob Bennett, R-Utah, opposes it. Utah is home to 33 of the 58 ILCs.
Sen. Bennett was rumored to be open to compromise, perhaps agreeing to a ban on interstate branching by commercially owned ILCs rather than a ban on commercial firms owning ILCs. But he has never confirmed such a stance.
Still, Rep. Gillmor remains optimistic.
"I think this year the Senate will act," he said. "I'm not sure what it will look like — what they act on.
"After they act, we'll go to conference committee, and that's where it will really happen."
On other issues, Rep. Gillmor said he is "leery" of dictating how the government-sponsored enterprises should fund affordable housing projects.
The provision is a priority for Rep. Frank in GSE reform legislation, but Rep. Gillmor said Fannie Mae and Freddie Mac should spend their earnings as they see fit.
"We should treat them as what they are: private companies," Rep. Gillmor said. "I would not, in a perfect world, be for the government mandating them to take a certain portion of their profits … and put them in a certain purpose. It's a private company, just like General Electric."
