First Gramm-Leach-Bliley Deal Approved

First Gramm-Leach-Bliley Deal Approval

Schwab Receives Approval to Become a Financial Holding Company and to Acquire US Trust

By John M. Baker, Esq.

The Federal Reserve on May 1 approved The Charles Schwab Corporation’s election to become a financial holding company and proposed acquisition of U.S. Trust Corporation and its bank and nonbank subsidiaries. The Schwab approval is the first under the Gramm-Leach-Bliley Act.

The Fed’s order, which largely resembles past orders approving bank acquisitions by banks, raises few concerns and in fact implies that acquisitions of banks by nonbanks may be more readily approved than when the acquiror is a bank. In particular, the Fed’s analysis of the proposal’s competitive effects was easier because Schwab previously owned no banks and the areas in which Schwab and U.S. Trust do compete – securities brokerage, investment advisory, mutual funds, and asset management and fiduciary services – have numerous providers in unconcentrated markets.

The largest part of the opinion discussed the Community Reinvestment Act (“CRA”). Since Schwab did not previously contgrol an institution subject to evaluation under the CRA, it was necessary to review only U.S. Trust’s CRA record. The merger was opposed by Inner City Press/Community on the Move, a “consumer advocacy” group that frequently uses CRA as a lever to increase bank funding of inner city mortgages. Inner City Press administers these lending operations, so the organization has its own interests. The Fed rejected Inner City Press’s request for a hearing on the proposal and based its CRA analysis primarily on the U.S. Trust banks’ most recent CRA performance evaluations.

The Fed’s press release, with a link to the order, is available online at

Copyright 2000, John M. Baker, Esq., Stradley, Ronon, Stevens & Young, LLP, 1220 19th Street, N.W., Suite 700, Washington, DC 20036 – (202) 822-9611- Fax (202) 822-0140 This article was originally posted to the FundLaw List, To subscribe to FundLaw, send a blank e-mail to

Nothing herein is intended as legal or financial advice. The law is different in different jurisdictions, and the facts of a particular matter can change the application of the law. Please consult an attorney or your financial advisor before acting upon the information contained in this article.

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Mark Astarita is a nationally recognized securities attorney, who represents investors, financial professionals and firms in securities litigation, arbitration and regulatory matters, including SEC and FINRA investigations and enforcement proceedings.

He is a partner in the national securities law firm Sallah Astarita & Cox, LLC, and the founder of The Securities Law Home Page -, which was one of the first legal topic sites on the Internet. It went online in 1995 and is updated daily with news, commentary and securities law related links.