Official Seal of the Board of Governors of the 

Federal Reserve System 

Board of Governors of the Federal Reserve System 

Washington, D.C. 20551 

Official Letterhead Stationery for 

Scott G. Alvarez, General Counsel 

March 21, 2006 

Oliver I. Ireland, Esq. 

Morrison & Foerster LLP 

2000 Pennsylvania Ave., N.W. 

Washington, D.C. 20006 

Dear Mr. Ireland: 

This responds to your December 23, 2005, letter requesting a 

determination that the transactions described below involving Custodial 

Trust Company (“CTC”), Princeton, New Jersey, would not cause CTC’s 

parent company, The Bear Stearns Companies Inc. (“Bear Stears”), New York, 

New York, to lose certain grandfather rights that it maintains under section 4(f) 

of the Bank Holding Company Act (“BHC Act”). [Footnote 1. Begin Footnote 

text. See 12 U.S.C. section 1843(f). End Footnote 1.] 

CTC is a New Jersey-chartered state nonmember bank that became 

a “bank” for purposes of the BHC Act as a result of the Competitive Equality 

Banking Act of 1987. Accordingly, Bear Stearns may retain its ownership of 

CTC and not be treated as a bank holding company only if Bear Stearns and 

CTC abide by the conditions set forth in section 4(f) of the BHC Act. One of 

these conditions generally prohibits Bear Stearns from acquiring control or 

more than 5 percent of the shares or assets of an additional bank or savings 

association. [Footnote 2. Begin Footnote 2 text. Id at section 1843(f)(2)(A)(i) 

and (ii). End Footnote 2.] 

You have indicated that Bear Stearns now wishes to convert CTC 

into a national bank. You have indicated that this conversion will be effected 
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directly, and that Bear Stearns will not establish, or acquire any shares of, a 

separate bank or savings association as part of the conversion process. [Footnote 3. 

Begin Footnote 3 text. You have represented that the direct conversion of CTC 

from a New Jersey-chartered bank to a national bank is permissible under both 

the National Bank Act and the New Jersey Code. See 12 U.S.C. section 35; 

New Jersey Code section 17-9A-154.1. End Footnote 3

this conversion, however, Bear Stearns also will establi

national bank trust company to be named Bear Stearns B

National Association (“BSBTC”) in Wilmington, Delaw

that BSBTC will comply with the limitations and restric

for, the trust company exception from the definition of 

2(c)(2)(D) of the BHC Act. [Footnote 4. Begin Footnote 

1841(c)(2)(D). End Footnote 4.] Bear Stearns would the

into CTC, with CTC being the entity that survives the m

the purpose of allowing CTC to change its name to BSB

change the location of its headquarters to Wilmington, D

Bear Stearns currently is the sole shareholder of CTC and 

would be the sole shareholder of New BSBTC (the re-named CTC) after 

consummation of the proposed transactions. You have represented that, prior 

to its merger with CTC, BSBTC would not be an operating company and 

would have no assets or liabilities. You also have represented that the proposal 

would not result in any change in ownership or control of CTC and that neither 

CTC nor Bear Stearns would acquire any assets of, or interest in, an additional 

operating bank or savings association as part of these transactions. 

The direct conversion of CTC from a state-chartered bank to a 

national bank would not, by itself, cause Bear Stearns to lose its grandfather 

rights under section 4(f) of the BHC Act. [Footnote 5. Begin Footnote 5 text. 

See Letter from Scott G. Alvarez, General Counsel of the Board, to William S. 

Eckland, Esq., dated October 12, 2004. End Footnote 5.] In addition, the BHC 

Act would not prevent Bear Stearns from chartering BSBTC. While the BHC 

Act prevents a grandfathered nonbank bank holding company such as Bear 

Stearns from acquiring control of an additional bank or thrift, [Footnote 6. 

Begin Footnote 6 text. 12 U.S.C. section 1843(f)(2)(A). End Footnote 6.] 

BSBTC, as a limited-purpose trust company, would not be a “bank” for 

purposes of the BHC Act. 
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Under these circumstances, the Legal Division would not 

recommend that the Board determine that the transactions described above 

would cause Bear Stearns to lose its grandfather rights under section 4(f) 

of the BHC Act. [Footnote 7. Begin Footnote 7 text. See Letter from 

Scott G. Alvarez, Associate General Counsel of the Board, to 

Andrew M. Hodgkin, Esq., dated January 28, 1999. End Footnote 7.

Of course, after consummation of the proposed transactions, New BS

and Bear Stearns must continue to comply with the conditions applic

to a nonbank bank and a grandfathered holding company, respective

under the BHC Act. 

This opinion is limited to the transactions described above and 

is based on the facts and representations included in your letter and related 

correspondence. Any material change in the facts presented may result in a 

different conclusion and should be reported to Board staff. If you have any 

questions about this letter, please contact Kieran J. Fallon, Assistant General 

Counsel, at (202) 452-5270, or Andrea R. Tokheim, Senior Attorney, at 

(202) 452-2300. 

Sincerely, 

(signed) 

Scott G. Alvarez