U.S. Bancorp (USB) operates under the second-oldest continuous national charter, originally Charter #24. Earlier charters have expired as banks were closed or acquired. USB’s charter was granted during Abraham Lincoln’s administration in 1864 following the passage of the National Banking Act (NBA) codified under Title 12. The NBA was a response to a credit crunch during the Civil war when the Treasury was empty forcing Congress to demand payment in spice rather than bank credit. The NBA succeeded in stabilizing credit problems and promoted a stable business climate working in conjunction with the National Currency Act which standardized national currency. [i] U.S. Bancorp is a national Bank Holding Company (BHC) and is governed by the Federal Reserve Board.[ii] They are the tenth largest in the country and incorporated in Delaware in 1929 and fall within the conscript of Security and Exchange Commission regulation as well. Both areas of regulation will be discussed within. Today U.S. Bancorp has grown to operate in twenty five mid-western and western states at 2,419 locations with 5,003 branded ATMs.[iii]
USB’s size developed from a number of aggressive mergers governed by the National Bank Consolidation and Merger Act (NBCMA).[iv] The NBCMA requires all mergers to be approved by the Comptroller of Currency, the board of directors, and shareholder ratification which is otherwise similar to corporate mergers. One string of USB’s merger history started with the merger of First Wisconsin National Bank and Star Bank of Cincinnati creating Firstar in 1999.[v] This initial bank holding corporation was comprised of First Wisconsin, the Bank of Iowa, Federated Bank, First Colonial Bancshares Corp., Investors Bank and First National Cincinnati. Five months later a larger move was made when Firstar Holding acquired Mercantile Bancorporation of St. Louis, Missouri (MBM). MBM had held Mark Twain Bancshares, Firstbank of Illinois, Hawkeye Bancorporation, and. The final major acquisition was Firstar’s buyout of U.S. Bancorp, headquartered in Minneapolis, Minnesota in 2001. Firstar changed its name to U.S. Bancorp after the last merger. U.S. Bancorp, also a holding company, held the original charter from one of the strains of bank acquisitions that U.S. Bancorp had completed. Those banks included United States National Bank of First Bank System, Inc. of Minneapolis, Minnesota, First National Bank of Minneapolis and First National Bank of St. Paul, both of which had been founded in 1864 the later held the original charter.
Although the history of large national bank holding companies read somewhat like the first book of Genesis the interest is in the pattern of growth and acquisition. The last flurry of activity that made U.S. Bancorp who they are today involved a group of large acquisitions. At the time those mergers were scrutinized and looked at with skepticism, where by today’s standards they would be more on the medium size. All mergers are subject to the approval of the Comptroller. First the Comptroller reviews the proposed merger to ensure it is consistent with NBCMA. Upon the Comptroller’s approval the board of director reviews the action and votes on whether it will be recommended to the shareholders. Recommendation requires a majority vote by the board of directors. Once recommended, the shareholders review the recommendation and decide to ratify the merger. The merger must be ratified and confirmed by the shareholders under a two-thirds majority.[vi] In USB’s case most of the acquisitions met little resistance but some were controversial.
During the merger of Firstar and USB, the Hotel Employees and Restaurant Employees International Union (HRIU) launched a website www.firstarwatch.com to provide information on the bank’s movements.[vii] HRIU’s claimed that many of its members had entrusted Firstar to manage their retirement money through mutual funds, a 401k plans, or union and company pension plans. One major concern was that as Firstar grew they became more distant from communities through mergers and acquisitions and engaged in business practices that did not have HRIU’s members in their best interests. The organization claimed that USB was not meeting its requirements under the Community Reinvestment Act (CRA). The CRA requires financial institutions to demonstrate that their deposit facilities serve the convenience and needs of the communities in which they are created to do business.[viii] Compliance is measured by three criteria, investment, service, and lending. Banks must meet credit needs, assistance with credit needs, and lending needs of their service areas. Enforcement of the act is executed through actions on applications that the depository facilities have before the Comptroller. The Comptroller will review the applicant’s standing and could refuse to approve the applications until the requirements of the CRA are met.[ix]
Aside from the potential of bumping up against the CRA the watchdog group drew the attention of the U. S. Department of Justice in an investigation of money laundering. Money Laundering and Financial Crimes Strategy Act of 1998 required the Secretary of the Treasury, in consultation with the Attorney General and other relevant agencies, including state and local agencies, to coordinate and implement a national strategy to address money laundering.[x] Firstarwatch.com provided information on a controversial loan to Adams Mark, a national hotel company that had also been repeatedly sued for discrimination.[xi] The loan Adams Mark sought was to finance a new 1,600 room hotel in Chicago. The group accused Firstar of entering a speculative hotel loan. The attention from these issues frustrated US Bancorp’s plans of expansion towards the end of their expansion period. Currently U.S. Bank holds an outstanding Community Reinvestment Act rating.[xii]
Filed under: Real Esate Law Issues | Tagged: Bank, Banking Law, U.S. Bancorp History
