One of the first big battles over the Obama administration’s proposals to remake the regulations governing the financial sector looks to be over industrial loan-companies. Several executives of the ILCs said that they are lobbying Congress to defeat a proposal by the Obama administration that would force them to convert to bank-holding companies and be subject to regulation by the Federal Reserve, the Wall Street Journal reports.
The ILCs are state-charted banks that offer federally insured savings accounts but are subject to a different regulatory regime than bank holding companies. Often they are operated by manufacturing or retail companies to provide banking like services to customers. Several are also owned by Wall Street firms, as well. Most are based in Utah, which explains why Utah lawmakers are at the forefront of resistance to the change.
As part of it’s overhaul of financial regulations, the Obama administration proposes to eliminate the ILC structure. The banks would have to reorganize as bank holding companies, which would subject them to more-stringent oversight and steeper capital requirements.
The White House views it as a consolidation of the oversight of the financial sector. Critics point out that ILCs have not played a notable role in contributing to the current crisis. They paint the move as a power-grab by the Fed.