Federated Beats Clock, Wins OTS Charter
WASHINGTON - Federated Department Stores Inc. became one of the last nonfinancial companies to slip through a celebrated loophole on Monday, when it won regulatory approval to convert its credit card bank to a federal thrift.Federated, which owns 400 stores including Macy's and Bloomingdale's in 33 states, will become a unitary thrift holding company for FDS Bank. Both are based in Mason, Ohio, a Cincinnati suburb.
Federated was one of five nonfinancial companies to apply for a thrift charter before May 4, 1999, a deadline set by Congress. The four other firms still waiting for approval from the Office of Thrift Supervision are Ford Motor Co., General Motors, GE Capital, and Deere Corp. (With the Gramm-Leach-Bliley Act of 1999, Congress closed the so-called unitary thrift loophole and prevented any more commercial firms from entering the banking business by buying a thrift.)
Carol Sanger, Federated's vice president of corporate affairs, said FDS Bank would soon offer a range of products to the more than 50 million people currently holding Federated credit cards.
"We're going to take advantage of this charter," she said, adding that Federated will submit a final business plan to the OTS by mid-July.
The OTS required FDS Bank to serve low- and moderate-income people in the greater Cincinnati metropolitan area. Previously, the Community Reinvestment Act only applied to a portion of the credit card bank's home county. FMR Corp., the parent of the Fidelity family of mutual funds, owns slightly over 10% of Federated and has agreed to keep the investment below 25%.
Regulators said FMR, which won its own unitary thrift charter last October, did this to avoid being classified as a "multiple-holding company," which would subject it to more regulatory scrutiny. Also, FMR had to certify that it is a passive investor, with no plans to attempt to acquire control of Federated.
- Eric Winig
Atlanta Thrift Shut Down, Assets Sold
WASHINGTON - Mutual Federal Savings Bank of Atlanta failed Friday, the second one of the year.The Federal Deposit Insurance Corp. said the $33.8 million-asset thrift will cost roughly $1.5 million to resolve.
Citizens Trust Bank, also in Atlanta, took over the failed thrift's $30 million of deposits and $29.8 million of its assets. Citizens Trust, a subsidiary of Citizens Bancshares Corp., paid the FDIC a $2.4 million premium.
Over the next two years, the FDIC agreed to cover 80% of the net chargeoffs on nearly $10 million of the assets Citizens Trust purchased. However, the FDIC will receive 80% of all recoveries on charged-off assets for three years.
Mutual Federal was the first thrift closed in 2000. Last year just one thrift was closed, while seven banks failed.
- Kevin Guerrero
Providian Adding 20,000 Customers a Day
PHOENIX -- In a keynote speech at American Banker's Best Practices in Retail Financial Services conference here yesterday, Shailesh Mehta, chairman and chief executive officer of Providian Financial Corp., said his company's target market is the $570 billion consumer lending market. The credit card specialist tripled its number of customers last year to 12 million, and currently signs up about 20,000 customers a day.Mr. Mehta said he seeks to have a technology platform flexible enough for him to say "yes" to as many customers as possible. "If your company is not growing organically, you have problems," he said. "You must have a strong customer acquisition engine."
- Chris Costanzo
