Obama Financial Plan Threatens Lenders

Publish Date: 
Jul 7, 2009
By Arlo Redwine

A PROPOSAL WITHIN the Obama administration’s financial-overhaul plan could force BMW, General Electric and Harley-Davidson to sell off their lending businesses or face heavier regulation, The Wall Street Journal reported recently.

These firms own state-chartered industrial loan companies (ILCs) that lend money and benefit from federally insured deposits, but are not regulated as heavily as normal banks. The Obama administration’s plan would force companies with ILC charters to register as bank-holding companies with the Federal Reserve.

According to the article, industry experts predict that if this happens, “most companies with ILC charters likely would close them down” after not meeting the Fed’s requirements or balking at the heavy regulation.

The article said that lawmakers and banking groups are lobbying to have the proposal removed from the plan. Treasury Secretary Timothy Geithner has said he’s open to negotiations. The House Committee of Financial Services is debating the overhaul plan through July. Months of further debate will likely follow.

The day after breaking the story, The Wall Street Journal reported more opposition to the proposal. The Economist also has analyzed the issue, noting a second plan proposal that could force General Electric to sell GE Capital.

The Economist, however, concluded that most ILC owners with something to sell, like Harley-Davidson and BMW, would not sell off their lending arms. Instead, they would "presumably accept the stricter oversight that comes with owning a bank.”

Click here for a list of the 45 ILCs in the United States, according to iBanknet. Other powersports lenders on the list include Merrick Bank Corp. and Medallion Bank.