Industrial Loan Companies: Where Banking and Commerce Meet

69 Pages Posted: 10 Jan 2012

See all articles by James R. Barth

James R. Barth

Auburn University; Milken Institute

Tong Li

Milken Institute

Apanard Angkinand

affiliation not provided to SSRN

Yuan‐Hsin Chiang

affiliation not provided to SSRN

Li Li

Milken Institute - Financial Research Group

Date Written: February 2012

Abstract

Should commercial firms be prohibited from owning banking institutions? Should the United States remain the only G20 country opposed to the “mixing of banking and commerce”? These questions have assumed new urgency as the Dodd Frank Act of July 2010 imposed a moratorium on the commercial ownership of industrial loan companies (ILCs), which was the last remaining entry point for commercial firms into banking. This paper specifically examines the role of ILCs in America's financial system from its beginnings in 1910 to the present. Special attention is paid to the performance of commercially owned ILCs prior to, during and after the most recent financial crisis. The examination is based upon both survey data and Federal Deposit Insurance Corporation (FDIC) data, which represents a database of the ILC industry that is the most comprehensive one available to date. The paper also reviews the laws and regulations regarding the mixing of banking and commerce, and discusses the advantages and disadvantages of allowing commercial ownership of banks.

JEL Classification: G18, G21, G28

Suggested Citation

Barth, James R. and Li, Tong and Angkinand, Apanard and Chiang, Yuan‐Hsin and Li, Li, Industrial Loan Companies: Where Banking and Commerce Meet (February 2012). Financial Markets, Institutions & Instruments, Vol. 21, Issue 1, pp. 1-69, 2012, Available at SSRN: https://ssrn.com/abstract=1982365 or http://dx.doi.org/10.1111/j.1468-0416.2011.00171.x

James R. Barth (Contact Author)

Auburn University ( email )

415 West Magnolia Avenue
Auburn, AL 36849
United States
334-844-2469 (Phone)
334-844-4960 (Fax)

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States

Tong Li

Milken Institute ( email )

1250 Fourth Street
Santa Monica, CA 90401
United States
310-570-4655 (Phone)
310-570-4625 (Fax)

Apanard Angkinand

affiliation not provided to SSRN

No Address Available

Yuan‐Hsin Chiang

affiliation not provided to SSRN

No Address Available

Li Li

Milken Institute - Financial Research Group

1250 Fourth Street
Santa Monica, CA 90401
United States

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