Is the OCC about to break the law?

The Office of the Comptroller of the Currency (OCC) has received a proposal from Figure Bank, N.A., part of the blockchain startup, Figure Technologies. The proposal would grant Figure Bank a bank charter that would allow it, as a national bank, to accept and hold deposits that lack federal deposit insurance. And, it was this lack of federal deposit insurance that triggered the bank runs and banks collapses that played a key role in ushering in the Great Depression.

Major banking organizations, such as the American Bankers Association, have petitioned the OCC to reject the petition. The organizations argue that Section 2 of the Federal Reserve Act does not permit national banks to offer uninsured deposits; to wit

“Every national bank in any State shall, upon commencing business or within ninety days after admission into the Union of the State in which it is located, become a member bank of the Federal Reserve System by subscribing and paying for stock in the Federal Reserve bank of its district in accordance with the provisions of this chapter and shall thereupon be an insured bank under the Federal Deposit Insurance Act [12 U.S.C. § 1811 et seq.], and failure to do so shall subject such bank to the penalty provided by section 501a of this title.”