Schwab Deal to Buy U.S. Trust Wins Federal Reserve Approval
WASHINGTON - Charles Schwab Corp. won Federal Reserve Board approval Monday to acquire U.S. Trust Corp.The $2.7 billion deal is expected to close by June 30, and would create the first financial conglomerate under the Gramm-Leach-Bliley Act.
In its 23-page decision, the Fed steered clear of controversy. The agency did not impose any special capital conditions on Schwab, saying the huge discount brokerage exceeds "relevant requirements."
The Fed also made it clear that securities regulators will continue to take the lead in supervising Schwab. "The board expects, in carrying out its responsibilities as umbrella supervisor, to rely heavily on the Securities and Exchange Commission for examination and other supervisory information," according to the order.
The Fed order did not mention any limits on transactions among affiliated companies controlled by Schwab.
"That's good news. They are not imposing a lot of conditions and they are keeping it simple," said Ronald R. Glancz, a partner with the Venable Baetjer Howard & Civiletti law firm here.
Schwab, with $29.3 billion of assets, is the first nonbank to take advantage of the new financial reform law, which lets banks, brokers, and insurers own each other. To purchase $5 billion-asset U.S. Trust, Schwab had to apply to the Fed to become a bank holding company and then convert to a financial holding company - steps that were taking simultaneously.
Schwab still needs approvals from various state agencies, including the New York Banking Department. U.S. Trust shareholders are scheduled to vote on the deal May 31.
- Barbara A. Rehm
Obstruction Convictions in Bank Failure
WASHINGTON - A federal jury found two former executives of the failed First National Bank of Keystone, W.Va., guilty of obstructing a federal examination of the bank.Former senior vice president Terry L. Church was convicted Friday on three felony counts including conspiracy and obstruction. Ms. Church, 47, faces a maximum of 15 years in prison and a $750,000 fine.
Michael H. Graham, who was a vice president and director of the bank, was convicted on one count of obstruction. Mr. Graham, 50, was originally charged with the same three counts as Ms. Church, but the count of aiding and abetting obstruction was dropped Thursday. He faces a maximum of five years in prison and a $250,000 fine.
The two executives will be sentenced July 17. An attorney for Mr. Graham said his client is considering an appeal. Ms. Church's attorneys did not return calls seeking comment.
The Federal Deposit Insurance Corp. has estimated that the bank's failure last fall will cost the insurance fund $750 million.
- Kevin Guerrero
