|March 20, 1998|
John D. Muller, Esq.
Dear Mr. Muller:
This is in response to your letter dated February 11, 1998, on behalf of your client, Transamerica Retail Financial Services Corporation ("Transamerica"), concerning its subsidiary bank, Whirlpool Financial National Bank ("Bank"). On January 1, 1998, Transamerica acquired Bank as part of Transamerica's acquisition of all the inventory financing, consumer financing, and international factoring businesses of Whirlpool Financial Corporation. In connection with its acquisition of Bank, Transamerica committed to the Board that, within two years after the acquisition, it would either (1) enter into an agreement to transfer control of Bank to an unaffiliated third party, (2) cause Bank to become a state non-member bank, or (3) take other steps permitted by the Board to conform its holding of Bank to applicable law.1
The purpose of the commitment provided to the Board was to address concerns under section 20 of the Glass-Steagall Act (12 U.S.C. § 377), which prohibits a member bank of the Federal Reserve System from becoming an affiliate of a company that is "engaged principally in the issue, flotation, underwriting, public sale, or distribution" of securities. Transamerica sponsors a family of open-end mutual funds. In addition, two Transamerica subsidiaries act as principal underwriter and distributor for the funds, and Transamerica is engaged, through subsidiaries, in issuing variable annuities. Accordingly, it appears that Transamerica affiliates may be engaged principally in the types of securities activities set forth in section 20 of the Act.
Transamerica now proposes to satisfy the commitment made to the Board by converting Bank from a national bank charter to a federal savings bank charter and terminating Bank's membership in the Federal Reserve System as soon as possible thereafter. As a federal savings bank that is not a member of the Federal Reserve System, Bank would no longer satisfy the definition of "member bank" in section 2 of the Glass-Steagall Act.2 Accordingly, following its conversion to a non-member savings association, the ownership of Bank by Transamerica would no longer be prohibited under section 20 of the Act.
Based on the facts and representations you have provided, it is my opinion that the proposed charter conversion and termination of Federal Reserve System membership by Bank would satisfy the commitment. In this regard, you should submit satisfactory evidence of the consummation of the proposal to my staff. This opinion is based on the facts and representations you have provided, and any material change in these facts or representations could result in a different conclusion and should be communicated to Board staff. If you have any questions, please contact Tom Corsi, Senior Counsel (202/452-3275), or Gordon Miller, Attorney (202/452-2534), of my staff.
(Signed) J. Virgil Mattingly
J. Virgil Mattingly
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