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orrowing costs and limit our access to the capital markets. Volatility in the global financing markets mayalso impact our ability to access the capital markets should we seek to do so, and have an adverse affect oninvestors’ willingness to purchase our securities, interest rates, credit spreads and the valuation levels ofequity markets. If we are unable to obtain funds and financing, or access the capital markets in a timelymanner, we may be forced to incur unanticipated costs or revise our business plans, and our business couldbe adversely impacted.Diverse and strong competition limits the interest rates that we can charge on consumer loans. Wecompete with many types of institutions for consumer loans, certain of which can provide loans atsignificantly below-market interest rates or, in some cases, zero interest rates in connection with automobilesales. Our inability to compete effectively against these companies or to maintain our relationships with thevarious automobile dealers through whom we offer consumer loans could limit the growth of our consumerloan business. Economic and credit market downturns could reduce the ability of our customers to repayloans, which could cause losses to our consumer loan portfolio.Our business could be negatively affected if we or our banking subsidiaries fail to remain wellcapitalized, and liquidity needs could affect our banking business. Our bank and thrift subsidiaries aresubject to significant regulation and supervision, which includes minimum regulatory capital standards.Franklin is also subject to minimum regulatory capital standards because it is a bank holding company andfinancial holding company registered with the FRB under the Bank Holding Company Act of 1956.Franklin and its bank and thrift subsidiaries are currently well capitalized under applicable guidelines.However, our business could be negatively affected if Franklin or its bank or thrift subsidiaries failed toremain well capitalized. For example, because our bank and thrift subsidiaries are well capitalized and weotherwise qualify as a financial holding company, we are permitted to engage in a broader range ofactivities than are permitted to a bank holding company. Loss of financial holding company status wouldrequire that we either cease these broader activities or divest our bank subsidiaries if we desire to continuesuch activities. The banking regulators are authorized (and sometimes required) to impose a wide range ofrequirements, conditions, and restrictions on banks, thrifts, and bank holding companies that fail to maintainadequate capital levels. In addition, liquidity needs could affect our banking business, which may be subjectto an unanticipated large number of withdrawals as a result of a number of factors, such as changed orunstable economic conditions, adverse trends or events, business closings and lay-offs, rates paid bycompetitors, general interest rate levels, and returns available to clients on alternative investments. Ourbanking subsidiaries may be required from time to time to rely on secondary sources of liquidity, such asthe sale of investment securities, Federal Home Loan Bank (“FHLB”) advances and federal funds lines toenable them to meet such withdrawal demands. These secondary sources may not be sufficient to meetliquidity needs.We are dependent on the earnings of our subsidiaries. Substantially all of our operations are conductedthrough our subsidiaries, as a result, our cash flow and our ability to fund operations are dependent upon theearnings of our subsidiaries and the distribution of earnings, loans or other payments by our subsidiaries.Our subsidiaries are separate and distinct legal entities and have no obligation to provide us with funds forour payment obligations, whether by dividends, distributions, loans or other payments. Any payments to usby our subsidiaries could be subject to statutory or contractual restrictions and are contingent upon oursubsidiaries’ earnings and business considerations.Item 1B.None.Unresolved Staff Comments.32