WASHINGTON — Home Depot Inc. said Thursday that it would end its bid to buy a Utah industrial loan company, adding another twist to the fight over retailers owning banks and further complicating legislation to ban commercially owned ILCs.
The retailer had applied in May 2006 for approval to buy EnerBank USA, a Salt Lake City ILC offering home improvement loans. But its application was stalled by a fierce debate over whether nonbanks should own such charters. The furor was sparked by a 2005 ILC bid from Wal-Mart Stores Inc., which was withdrawn in last March.
"The Home Depot no longer intends to acquire EnerBank USA and has informed the organization … of our plans," Sarah Molinari, a spokeswoman for the Atlanta company, said in an interview Thursday. "As we move into fiscal [year] 2008, this acquisition is no longer part of our strategy as we are focusing all of our resources on our core retail business."
Home Depot's withdrawal struck observers as a further obstacle to passage of legislation in Congress to restrict commercial ownership of ILCs. The House passed a bill in May, but action in the Senate has been much slower, and Wal-Mart's withdrawal alleviated pressure on lawmakers.
If regulators had approved the Home Depot application, "it could reignite the issue in the Senate," said George Sutton, a lawyer and former financial institutions commissioner in Utah, where most ILCs are based.
But Home Depot's decision means there is "less risk of the issue heating up again," he said.
Like other applications, Home Depot's languished under two moratoriums imposed by the Federal Deposit Insurance Corp.
Giving Congress time to clarify who can own an ILC charter, the FDIC in July 2006 halted action on all ILC bids, and then the next January extended it for a year for commercial firms with applications pending.
The second freeze expires next Thursday, and the agency has said it will not be extended again. Still, with senators deadlocked on legislation, the FDIC has made it clear it will not be issuing approvals right away.
John Douglas, a former FDIC general counsel now in private practice in Atlanta, said a Home Depot retreat also alleviates the burden on the FDIC, which had found itself in the knotty position of potentially approving two applications vehemently opposed by the banking industry. During the moratorium, other less controversial applicants have also withdrawn, reducing the agency's workload.
The FDIC "can't be disappointed," Mr. Douglas said. "When you look back, this moratorium was the reaction to the fear of Wal-Mart and Home Depot. Withdrawal of those applications takes that pressure away."
Banking industry representatives said they plan to continue to press for legislation, and Senate Banking Committee Chairman Chris Dodd just this week pledged to work out differences with ILC supporters to get legislation moving early in 2008. Lobbyists are expecting a committee vote on the issue next month.
Still-pending applications before the FDIC include Blackstone Group's bid to own an ILC tied to its deal for Alliance Data Corp., and an ILC proposed by Chrysler Financial.
Sen. Dodd, D-Conn., released draft legislation in November of a stricter ILC bill than the one that cleared the House. But his bill faces stiff opposition from Sen. Robert Bennett, R-Utah, a senior member of Senate Banking and the body's strongest ILC advocate.
Home Depot's withdrawal does not "change things, because the issue still remains, and that's the closing of the ILC loophole," said Camden Fine, the chief executive of the Independent Community Bankers of America, which has been a tough critic of ILCs and has made stopping the Wal-Mart and Home Depot bids a priority.
"We don't believe commercial firms should be allowed to own FDIC-insured institutions," Mr. Fine said.
Though Ms. Molinari stressed Home Depot's focus on its core business as a reason against pursuing the ILC application, observers said the long delay prompted by the FDIC's inaction likely influenced the company's decision.
EnerBank's parent company, CMS Energy Corp. of Jackson, Mich., has had to maintain the institution for almost two years, despite the deal to sell to Home Depot.
"In those situations, neither party can be in limbo for a long period of time," said V. Gerard Comizio, a partner at Paul, Hastings, Janofsky & Walker LLP.
Mr. Douglas, who works for the same firm, agreed.
"This is an existing bank that needs to run and operate. Holding a bank to a deal for what's now 18 months, which would probably be another six, seven, or eight months beyond that, it's a long time to tie up a bank," he said.
Neither lawyer represents Home Depot.
According to an FDIC spokesman, the application has not formally been withdrawn.
"We don't comment on pending applications," the spokesman said.
A spokesman at CMS Energy declined to comment.
